Document ID: SEC-2012-1443-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2012-09-04T04:00Z

[Federal Register Volume 77, Number 171 (Tuesday, September 4, 2012)]
[Notices]
[Pages 53957-53958]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21677]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67738; File No. SR-NASDAQ-2012-100]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Direct Registration Requirements under Rule 5210(c)

August 28, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 24, 2012, The 
NASDAQ Stock Market LLC (``Nasdaq'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change described 
in Items I and II below, which items have been prepared primarily by 
Nasdaq. Nasdaq filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder so that the 
proposed rule change was effective upon filing with the Commission.\2\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A) and 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to modify Rule 5210(c) related to the Direct 
Registration System (``DRS'') to reconcile a discrepancy between the 
initial and continued listing requirements. Nasdaq will implement the 
proposed change immediately. The text of the proposed rule change is 
available on Nasdaq's Web site at http://www.nasdaq.cchwallstreet.com, 
at http://www.sec.gov, at the principal office of Nasdaq, 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 and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq has prepared summaries, set forth in sections 
(A), (B), and (C) below, of the most significant aspects of these 
statements.\3\
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    \3\ The Commission has modified the text of the summaries 
prepared by Nasdaq.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    Nasdaq proposes to modify Rule 5210(c) related to DRS to reconcile 
a discrepancy between the initial and continued listing requirements. 
As currently drafted, Rule 5210(c) provides that the DRS requirement 
does not apply to additional classes of securities of companies which 
already have securities listed on Nasdaq and companies which 
immediately prior to such listing had securities listed on another 
registered securities exchange in the U.S.
    This language is now outdated. Specifically, when Nasdaq introduced 
the DRS, it applied the rule to most new listings, but created a phase-
in period for already listed companies, including companies listing 
additional classes of securities and companies switching from other 
exchanges.\4\ This phase-in period has now ended \5\ and all listed 
companies are required by Rule 5255 to comply with the DRS requirement, 
however, the language allowing an exemption from the DRS initial 
listing requirement for these companies remains in Rule 5210(c). Thus, 
as currently written, a company could qualify to list on Nasdaq 
pursuant to one of these exceptions in Rule 5210(c), but immediately be 
out of compliance with the continued listing requirements in Rule 5255. 
The purpose of the proposed rule change is to remove these exceptions 
from the initial listing requirement, and thereby clarify and conform 
to these rules.
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    \4\ Securities Exchange Act Release No. 54288 (August 8, 2006), 
71 FR 47276 (August 16, 2006) (Order Granting Approval of SR-NASDAQ-
2006-008).
    \5\ The phase in period ended on March 31, 2008. See Securities 
Exchange Act Release No. 57062 (December 28, 2007), 73 FR 900 
(January 4, 2008) (Order Granting Approval of SR-NASDAQ-2007-101).
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    Additionally, the proposed rule change corrects a second 
inconsistency between the initial listings rules and continued listings 
rules regarding securities which are book-entry-only.

[[Page 53958]]

The continued listing requirement in Rule 5255 excludes securities that 
are book-entry-only because ownership of such securities is already 
recorded only on the books and records of the company and is not held 
in certificated form. As such, these securities already enjoy many of 
the advantages that DRS is designed to promote. The comparable 
exception in the initial listing requirement contained in Rule 5210(c), 
however, only excludes ``non-equity securities that are book-entry-
only.'' While similar language previously existed limiting the 
exception from the continued listing requirement to non-equity 
securities, Nasdaq expanded that exception to include all securities 
that are book-entry-only.\6\ As with the other correction herein, this 
creates an inconsistency between the initial and continued listings 
requirements. Nasdaq now proposes to expand the exception in Rule 
5210(c) relating to initial listings to exclude all securities that are 
book-entry-only to clarify and conform these rules. If a security 
ceases to be book-entry-only, that security would then be required to 
be eligible to participate in DRS.
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    \6\ See Securities Exchange Act Release No. 58125 (July 9, 
2008), 73 FR 42389 (July 21, 2008) (Order Granting Approval of SR-
NASDAQ-2008-31).
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(2) Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\7\ in general, and with section 
6(b)(5) of the Act,\8\ in particular, in that the proposal is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination in persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The proposed rule change 
will remove inconsistent rule language, thereby clarifying Nasdaq's 
rules, and help assure that the benefits of DRS are available for 
securities that do not otherwise enjoy those benefits, which should in 
turn help promote the public interest.
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    \7\ 15 U.S.C 78f.
    \8\ 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 result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    Written comments relating to the proposed rule change have not been 
solicited Nasdaq. Nasdaq will notify the Commission of any written 
comments received by Nasdaq.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) of the Act and paragraph (f)(6) of Rule 19b-4 
thereunder, in that the proposed rule change: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) does not become operative for 30 days after the date of the 
filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. On 
August 10, 2012, Nasdaq gave the Commission written notice of its 
intent to file the proposed rule change, along with a brief description 
and text of the proposed rule change.
    Nasdaq believes that the proposed rule change does not 
significantly affect the protection of investors or the public interest 
because it conforms the initial listing standard contained in Rule 5210 
to the existing continued listing standard contained in Rule 5255 by 
eliminating exceptions to the rule that are no longer applicable and 
providing that the rule is not applicable to any security which is 
book-entry only, since such securities already enjoy the benefits of a 
direct registration program.
    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. Nasdaq has 
provided the Commission of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2012-100 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2012-100. 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 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 Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street 
NE., Washington, DC 20549-1090, on official business days between the 
hours of 10 a.m. and 3 p.m. Copies of such filings will also be 
available for inspection and copying at the principal office of Nasdaq 
and on Nasdaq's Web site at http://www.nasdaq.cchwallstreet.com. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2012-100 and should 
be submitted on or before September 25, 2012.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\

    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-21677 Filed 8-31-12; 8:45 am]
BILLING CODE 8011-01-P