Document ID: SEC-2009-1215-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Listing Standards for Selected Equity-Linked Debt Securities
Posted Date: 2009-08-26T04:00Z

[Federal Register: August 26, 2009 (Volume 74, Number 164)]
[Notices]               
[Page 43174-43176]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26au09-121]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60514; File No. SR-NASDAQ-2009-075]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change Relating to the Listing Standards for Selected Equity-
Linked Debt Securities

August 17, 2009.
    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 August 6, 2009, The NASDAQ Stock Market LLC (``Nasdaq'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by Nasdaq. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons and is approving the proposed rule change on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is proposing to amend Nasdaq Rule 5715, the Exchange's 
listing standards for selected equity-linked debt securities 
(``SEEDS''). The text of the proposed rule change is available from 
Nasdaq's Web site at http://nasdaq.cchwallstreet.com, at Nasdaq's 
principal office, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below, and is set forth in Sections A, B, and C below.

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

1. Purpose
    The Exchange is proposing to amend Nasdaq Rule 5715, the Exchange's 
listing standards for SEEDS, to provide for greater flexibility in the 
listing criteria for such securities, as set forth below. The proposed 
substantive rule changes herein are based upon the rules of NYSE Arca, 
Inc. (``NYSEArca'') \3\ and the American Stock Exchange LLC 
(``Amex'').\4\ Similar proposed rule changes by other national 
securities

[[Page 43175]]

exchanges have been approved recently by the Commission.\5\
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    \3\ See Securities Exchange Act Release No. 57219 (Jan. 29, 
2008), 73 FR 6542 (Feb. 4, 2008) (SR-NYSEArca-2008-13).
    \4\ See Securities Exchange Act Release No. 55733 (May 10, 
2007), 72 FR 27602 (May 16, 2007) (SR-Amex-2007-34) (the ``May 2007 
Amex Order'') and Securities Exchange Act Release No. 56629 (October 
9, 2007), 72 FR 58689 (October 16, 2007) (SR-Amex-2007-87) (the 
``October 2007 Amex Order''). These two orders approved changes to 
Section 107A of the Amex Company Guide.
    \5\ See Securities Exchange Act Release No. 56924 (December 7, 
2007), 72 FR 70918 (December 13, 2007) (SR-NYSEArca-2007-98) 
(amending Rule 5.2(j)(2) (``Equity-Linked Notes'')); Securities 
Exchange Act Release No. 56906 (December 5, 2007), 72 FR 70636 
(December 12, 2007) (SR-NYSEArca-2007-103) (amending Rule 5.2(j)(1) 
(``Other Securities'')); and Securities Exchange Act Release No. 
56593 (October 1, 2007), 72 FR 57362 (October 9, 2007) (SR-NYSEArca-
2007-96) (amending Rule 5.2(j)(6) (``Equity Index-Linked Securities, 
Commodity-Linked Securities and Currency-Linked Securities'')).
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    Nasdaq Rule 5715 currently provides that an issue of SEEDS must 
have a minimum public distribution of 1,000,000 notes with a minimum of 
400 public note-holders, except, if traded in thousand dollar 
denominations, then no minimum number of holders. The Exchange proposes 
to expand the exception to provide that, if the notes are traded in 
thousand dollar denominations, then there is also no minimum public 
distribution requirement.\6\ The Exchange notes that, without the 
exception to the 1,000,000 publicly distributed notes requirement, the 
Exchange would be unable to list issues in thousand dollar 
denominations having a market value of less than $1 billion. The 
Exchange believes that the proposed exception is a reasonable 
accommodation for those issuances in $1,000 denominations.
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    \6\ See the May 2007 Amex Order, Note 4, supra.
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    The Exchange proposes to further amend Nasdaq Rule 5715 to provide 
that there are no minimum public distribution and holders requirements 
if the notes are redeemable at the option of the holders thereof on at 
least a weekly basis (regardless of whether the notes are traded in 
thousand dollar denominations).\7\ The Exchange believes that a weekly 
redemption right will ensure a strong correlation between the market 
price of the notes and the performance of the underlying index, as 
holders will be unlikely to sell their notes for less than their 
redemption value if they have a weekly right to redeem such notes for 
their full value. In addition, in the case of certain notes with a 
weekly redemption feature the issuer may have the ability to issue new 
notes from time to time at market prices prevailing at the time of 
sale, at prices related to market prices, or at negotiated prices. This 
provides a ready supply of new notes, thereby lessening the possibility 
that the market price of such notes will be affected by a scarcity of 
available notes for sale. The Exchange believes that the weekly 
redemption right also assists in maintaining a strong correlation 
between the market price and the indicative value of the notes, as 
investors will be unlikely to pay more than the indicative value in the 
open market if they can acquire notes from the issuer at that price.
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    \7\ See the May 2007 Amex Order (approving no minimum holders 
requirement if there is a weekly redemption right) and the October 
2007 Amex Order (approving no minimum public distribution 
requirement if there is a weekly redemption right), Note 4, supra.
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    The Exchange believes that the ability to list SEEDS with these 
characteristics without any minimum public distribution or holders 
requirements is important to the successful listing of such notes. 
Issuers issuing these types of notes generally do not intend to do so 
by way of an underwritten offering. Rather, the distribution 
arrangement is analogous to that of an exchange traded fund issuance, 
in that the issue is launched without any significant distribution 
event and the float increases over time as investors purchase 
additional securities from the issuer at the then indicative value. 
Investors will generally seek to purchase the notes at a point when the 
underlying index is at a level that they perceive as providing an 
attractive growth opportunity. In the context of such a distribution 
arrangement, it is difficult for an issuer to guarantee its ability to 
sell a specific number of units on the listing date. However, the 
Exchange believes that this difficulty in ensuring the sale of 
1,000,000 notes and 400 public holders on the listing date is not 
indicative of a likely long-term lack of liquidity in the notes or, for 
the reasons set forth in the prior paragraph, of a difficulty in 
establishing a pricing equilibrium in the notes or a successful two-
sided market.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \9\ in particular, in that it is designed 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. 
The proposed rule change is consistent with that requirement in that 
conforming the listing standard for SEEDS enables continued multiple 
listing and trading of SEEDS across multiple venues within the national 
market system.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2009-075 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2009-075. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of Nasdaq. All

[[Page 43176]]

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 publicly available. All 
submissions should refer to File Number SR-NASDAQ-2009-075 and should 
be submitted on or before September 16, 2009.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\10\ The Commission believes that the proposal is consistent 
with Section 6(b)(5) \11\ in particular, in that it is designed 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. The Commission believes that the proposed rule change should 
enhance competition among issuers, to the benefit of the market, by 
expanding the listing and trading of SEEDS.
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    \10\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\12\ for approving the proposed rule change prior to the 30th 
day after the date of publication of the notice of filing thereof in 
the Federal Register. The proposal seeks to conform the Exchange's 
rules for SEEDS to the rules of other exchanges that have previously 
been approved by the Commission.\13\ Therefore, the Commission does not 
believe that the Exchange's proposal raises any novel regulatory 
issues. The Commission believes that accelerating approval of this 
proposal should benefit investors by creating, without undue delay, 
additional competition in the market for these products.
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    \12\ 15 U.S.C. 78s(b)(2).
    \13\ See Securities Exchange Act Release No. 55733 (May 10, 
2007), 72 FR 27602 (May 16, 2007) (SR-Amex-2007-34); Securities 
Exchange Act Release No. 56629 (October 9, 2007), 72 FR 58689 
(October 16, 2007) (SR-Amex-2007-87); and Securities Exchange Act 
Release No. 56924 (December 7, 2007), 72 FR 70918 (December 13, 
2007) (SR-NYSEArca-2007-98) (amending Rule 5.2(j)(2) (``Equity-
Linked Notes'')).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-NASDAQ-2009-075) be, and it 
hereby is, approved on an accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-20531 Filed 8-25-09; 8:45 am]

BILLING CODE 8010-01-P