Document ID: SEC-2008-0056-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-01-10T05:00Z

[Federal Register: January 10, 2008 (Volume 73, Number 7)]
[Notices]               
[Page 1901-1903]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10ja08-70]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57099; File No. SR-NASDAQ-2008-002]

 
Self-Regulatory Organizations; the NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Nasdaq Stockholders' Agreement Between the Nasdaq Stock 
Market, Inc. and Borse Dubai Limited

January 4, 2008.
    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 January 2, 2008, the NASDAQ Stock Market LLC (the ``Nasdaq 
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 substantially by the Nasdaq 
Exchange. The Nasdaq Exchange filed the proposed rule change pursuant 
to section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders it effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Nasdaq Exchange's parent corporation, The Nasdaq Stock Market, 
Inc. (``Nasdaq''),\5\ proposes to enter into a Nasdaq Stockholders'' 
Agreement (the ``Agreement'') with Borse Dubai Limited (``Borse 
Dubai''). There is no proposed rule text.
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    \5\ On December 12, 2007, Nasdaq's stockholders voted to approve 
a change in its name from The Nasdaq Stock Market, Inc. to The 
NASDAQ OMX Group, Inc. The change will become effective upon the 
closing of the Transactions (as defined below).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Nasdaq Exchange included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. The Nasdaq Exchange has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

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

1. Purpose
    On November 15, 2007, Nasdaq entered into definitive agreements 
with Borse Dubai and BD Stockholm AB, and with Borse Dubai and Dubai 
International Financial Exchange (``DIFX'') (the ``Definitive 
Agreements'') pursuant to which (i) Borse Dubai will acquire up to 100% 
of the outstanding share capital of OMX AB (``OMX'') by means of a 
public tender offer, (ii) Borse Dubai will acquire shares of common 
stock of Nasdaq representing approximately 28% of its outstanding share 
capital, with the shares in excess of 19.9% held in a trust subject to 
an obligation to sell under certain conditions, (iii) Nasdaq will 
acquire 33.3% of the outstanding share capital of DIFX, an exchange 
subsidiary of Borse Dubai, and (iv) Nasdaq will acquire up to 100% of 
the outstanding share capital of OMX from Borse Dubai (collectively, 
the ``Transactions'').\6\ The

[[Page 1902]]

shares held by Borse Dubai directly and in the trust will be subject to 
Article Fourth of Nasdaq's Restated Certificate of Incorporation,\7\ 
which provides that no person who is the beneficial owner of voting 
securities of Nasdaq in excess of 5% of the then-outstanding shares of 
stock generally entitled to vote (``Excess Securities'') may vote such 
Excess Securities.
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    \6\ Copies of the Definitive Agreements and a description of 
their terms were filed by Nasdaq on Form 8-K on November 16, 2007 
and are available at http://www.sec.gov/Archives/edgar/data/1120193/000119312507249279/d8k.htm
.

    \7\ As amended most recently on July 31, 2006. See Securities 
Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 
(January 23, 2006).
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    At the time of the closing of the Transactions, Nasdaq and Borse 
Dubai will enter into the Agreement, under which, among other things, 
Borse Dubai will have the right to recommend two persons reasonably 
acceptable to the Nasdaq Nominating Committee (the ``Board Designees'') 
to serve as directors of Nasdaq. Under the Agreement, Nasdaq will: (i) 
Include the Board Designees on each slate of nominees proposed by 
management of Nasdaq; (ii) recommend the election of the Board 
Designees to the stockholders of Nasdaq; and (iii) otherwise use 
reasonable best efforts to cause the Board Designees to be elected to 
the Board of Directors. Nasdaq has also agreed to use reasonable best 
efforts to cause the appointment of one of the Board Designees to the 
Audit, Executive, Finance, and Management Compensation committees of 
the Board of Directors, and to cause the appointment of another person 
designated by Borse Dubai to serve on the Nominating Committee (the 
``Nominating Committee Designee'', and together with the Board 
Designees, the ``Borse Dubai Designees''), but in each case only if 
such person meets the requirements for service on the committee.\8\
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    \8\ These provisions relating to the Borse Dubai Designees 
remain in effect as long as Borse Dubai maintains at least 50% of 
its initial 19.9% direct investment in Nasdaq. As long as Borse 
Dubai maintains at least 25% of this investment, it will be entitled 
to propose one director for nomination, but will have no rights with 
regard to committees.
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    The Agreement relates solely to the Board of Directors of Nasdaq, 
and not to the boards of any of its subsidiaries, including the Board 
of Directors of the Nasdaq Exchange. Nevertheless, the provisions of 
the Agreement described above could be considered a proposed rule 
change of the Nasdaq Exchange, if they were viewed as affecting the 
influence that a significant stockholder of Nasdaq might be seen as 
exercising over the business and affairs of the Nasdaq Exchange in its 
capacity as a wholly owned subsidiary of Nasdaq.
    In general, directors of Nasdaq, including the Board Designees, 
must be nominated by a Nominating Committee,\9\ the composition of 
which is subject to the requirements of the Nasdaq By-Laws and Nasdaq 
Exchange Rule 4350,\10\ and must then be elected by the stockholders of 
Nasdaq. The Nasdaq Board is currently composed of 13 members, but will 
be expanded to 16 members at the time of the closing of the 
Transactions. Thus, the Board Designees would represent 12.5% of the 
Nasdaq Board.
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    \9\ An exception to the requirement of nomination by the 
Nominating Committee exists for nominations by a stockholder who is 
conducting a proxy contest and who complies with the strict 
requirements of the Nasdaq By-Laws governing direct stockholder 
nomination. The Board Designees would not be nominated by Borse 
Dubai under these provisions.
    \10\ Currently, the Nasdaq By-Laws provide that the Nominating 
Committee must be composed of directors in their final year of 
service on the Nasdaq Board or other persons who are not officers or 
employees of Nasdaq. Rule 4350, which governs Nasdaq as a company 
whose securities are listed on the Nasdaq Exchange, requires 
Nominating Committee members to satisfy the definition of 
``independence'' in Nasdaq Exchange Rule 4200 and IM-4200 and to 
otherwise be deemed independent by the Nasdaq Board. In the future, 
Nasdaq may propose a by-law amendment to require all Nominating 
Committee members to be directors (with no limitation as to length 
of service), but Rule 4350 would continue to apply in that event.
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    The committees that are the subject of the Agreement are subject to 
compositional requirements established by the Nasdaq By-Laws; moreover, 
the Audit, Management Compensation, and Nominating Committees are 
subject to independence requirements established by Nasdaq Exchange 
Rule 4350 and, in the case of the Audit Committee, by 10A-3 under the 
Act.\11\ Thus, depending on the affiliations of the Borse Dubai 
Designees and the judgment of the Nasdaq Board with regard to their 
independence, they would not be eligible for service on these three 
committees. Each of these committees currently has between four and 
seven members. Upon the closing of the Transactions, the size of each 
committee would remain the same or grow to reflect the increased size 
of the whole Board. Thus, each of the committees on which a Borse Dubai 
Designee serves will include at least five directors.
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    \11\ 17 CFR 240.10A-3.
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 2. Statutory Basis
    The Nasdaq Exchange believes that the proposed rule change is 
consistent with the provisions of section 6 of the Act,\12\ in general, 
and with sections 6(b)(1) and (b)(5) of the Act,\13\ in particular, in 
that the proposal enables the Nasdaq Exchange to be so organized as to 
have the capacity to be able to carry out the purposes of the Act and 
to comply with and enforce compliance by members and persons associated 
with members with provisions of the Act, the rules and regulations 
thereunder, and self-regulatory organization (``SRO'') rules, and is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(1), (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Nasdaq Exchange 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 on the proposed rule change were neither solicited 
nor received.

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, if 
consistent with the protection of investors and public interest, it has 
become effective pursuant to section 19(b)(3)(A) of the Act \14\ and 
Rule 19b-4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) may not become 
operative prior to 30 days after the date of filing unless the 
Commission designates a shorter time if such action is consistent with 
the protection of investors and the public interest.\16\ The Nasdaq 
Exchange

[[Page 1903]]

has requested that the Commission waive the 30-day operative delay set 
forth in Rule 19b-4(f)(6)(iii) under the Act \17\ to ensure that the 
filing is effective and therefore does not delay the commencement of 
the offer or the closing of the Transactions. The parties to the 
Transactions expect all regulatory actions necessary for the closing of 
the Transactions to be completed prior to Borse Dubai commencing its 
offer for OMX shares. The Commission believes that the earlier 
operative date is consistent with the protection of investors and the 
public interest.
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    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a SRO submit to 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, at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Commission notes that the Nasdaq Exchange has satisfied the five-day 
pre-filing notice requirement.
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
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    Accordingly, the Commission designates the proposal to be operative 
upon filing with the Commission.\18\
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    \18\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-NASDAQ-2008-002 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2008-002. 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 the Nasdaq Exchange. 
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-2008-
002 and should be submitted on or before January 31, 2008. 

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-187 Filed 1-9-08; 8:45 am]

BILLING CODE 8011-01-P