Document ID: SEC-2014-1451-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2014-08-28T04:00Z

[Federal Register Volume 79, Number 167 (Thursday, August 28, 2014)]
[Notices]
[Pages 51383-51385]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-20465]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72899; File No. SR-NASDAQ-2014-067]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of Proposed Rule Change To Rule 5305 To Eliminate the 
Automatic Transfer of Companies From The NASDAQ Global Market to The 
NASDAQ Global Select Market

August 22, 2014.

I. Introduction

    On June 25, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend its rules in order to eliminate the 
Exchange's automatic annual review and transfer of qualified companies 
from The NASDAQ Global Market to The NASDAQ Global Select Market. The 
proposed rule change was published for comment in the Federal Register 
on July 10, 2014.\3\ The Commission received no comment letters 
regarding the proposed rule change. This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 72538 (July 3, 
2014), 79 FR 39446 (``Notice'').
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II. Description of the Proposal

    NASDAQ consists of three listing tiers: The NASDAQ Global Select 
Market (``Global Select'' or ``Global Select Market''), The NASDAQ 
Global Market (``Global Market''), and The NASDAQ Capital Market 
(``Capital

[[Page 51384]]

Market''). Each tier has different listing requirements; Capital Market 
has the lowest quantitative criteria to qualify for listing and Global 
Select has the highest quantitative criteria to qualify for listing. In 
its filing NASDAQ states that the tiers were designed to appeal to 
companies with different characteristics.\4\ Currently, pursuant to 
NASDAQ Rule 5305(b), NASDAQ conducts an annual review of all Global 
Market-listed companies' qualifications each year in November and 
December based on data as of October 31, and automatically places 
qualified Global Market companies in the Global Select tier the 
following January.\5\ While this annual review currently occurs 
automatically, a Global Market-listed company also may apply to list on 
the Global Select tier at any time.\6\ Companies transferring from the 
Global Market to the Global Select Market, whether as part of the 
annual review process or upon their own application, are not assessed 
entry or application fees.\7\
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    \4\ See Notice, 79 FR at 39446.
    \5\ Id.
    \6\ Id.
    \7\ Id.
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    The Exchange has proposed to eliminate NASDAQ's automatic annual 
review and transfer of qualified companies to the Global Select Market. 
Under the proposal, NASDAQ would review Global Market-listed companies 
for transfer to the Global Select Market only upon application by the 
company. To effect this change, the Exchange has proposed to delete the 
text of Rule 5305(b). According to the Exchange, the reasons for the 
implementation of the automatic annual review and transfer process in 
2006, when the Global Select tier was created, are less relevant today, 
and eliminating this process would remove an unnecessary burden on 
NASDAQ staff.\8\ NASDAQ proposes to implement this change upon 
approval, and states that it will notify Global Market-listed companies 
about this change via an email communication.\9\
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    \8\ Id. at 39446-47. NASDAQ notes that 228 securities 
transferred to the Global Select Market in January 2011 based on 
NASDAQ's automatic review, and between 58 and 77 securities 
transferred in each subsequent year. Id. at 39446 n.5.
    \9\ Id. at 39446.
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    As a result of the proposed rule change, companies automatically 
transferred in January 2014 would be the last group automatically 
transferred upon NASDAQ's review under Rule 5305(b). A Global Market-
listed company could continue to apply for transfer to the Global 
Select tier at any point during the year by submitting a listing 
application, and the review of an application would continue to be 
conducted without cost to the issuer.\10\ Qualified companies that 
apply could transfer immediately upon confirmation by NASDAQ staff that 
the company meets the Global Select Market listing requirements, and 
would not owe any entry or other fees in connection with a transfer 
from the Global Market to the Global Select tier.\11\
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    \10\ Id.
    \11\ Id. at 39446-47. The Commission also notes that annual fees 
for continued listing are the same for the Global Market and Global 
Select tiers.
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III. Discussion and Commission Findings

    After careful review, 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.\12\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\13\ 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; and are not designed to permit unfair discrimination 
between customers, issuers, brokers or dealers.
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    \12\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    As a result of the proposed rule change, Global Market-listed 
companies will have to monitor whether they qualify for transfer to the 
Global Select Market and submit an application for listing on the 
Global Select Market, rather than rely on the Exchange's automatic 
review and transfer process. The Commission observes that this could 
create an additional burden for Global Market-listed issuers that would 
otherwise rely on the Exchange's automatic process for transfer to the 
Global Select tier. The Exchange acknowledges this burden, but believes 
that, on balance, it is not significant enough to warrant continuing 
the automatic transfer process, which places a burden on NASDAQ staff 
that the Exchange believes is unnecessary.\14\ The Exchange notes that 
much of the information required for the application is pre-populated 
for a company, and asserts that, given the ease of the application 
process, it would continue to be simple for qualified companies to 
request review at any time and without cost.\15\
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    \14\ See Notice, 79 FR at 39446-47.
    \15\ Id. at 39446. The Exchange states that the application to 
transfer from the Global Market to the Global Select Market is 
available on its Web site, completed online and pre-populated with 
the company's identifying information based on its symbol and CIK 
code or CUSIP number. The listed company generally will only need to 
provide contact information, affirm the accuracy of the information 
in the application, and accept the Listing Agreement. Id. at n. 6.
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    Balancing the apparent simplicity of the application process and 
the fact that Global Market-listed companies may apply for a transfer 
to the Global Select tier at any time and with no charge from NASDAQ 
against the unnecessary burden that NASDAQ asserts is placed on its 
staff by the automatic review and transfer process, the Commission 
believes that the proposed rule change is reasonable and consistent 
with Section 6(b)(5) of the Act in that it promotes just and equitable 
principles of trade, protects investors and the public interest, and is 
not designed to permit unfair discrimination between issuers. Under the 
proposal, a Global Market-listed company that is unsure of its status 
could continue to submit an application and request review of its 
qualifications at any time during the year through what appears to be a 
relatively simple application process, and with no charge or additional 
fees imposed by NASDAQ.\16\ While the Commission expects that companies 
would monitor their listing qualifications, even a company that 
performs little or no such monitoring could obtain a review of its 
qualifications from NASDAQ at any time and potentially transfer to the 
Global Select tier with apparent ease.
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    \16\ See supra note 11.
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    As noted above, the automatic review process was developed at the 
inception of the Global Select tier to notify companies about their 
eligibility for that tier, which was, at that time, new and unfamiliar 
to them. As a result, the Commission notes that the automatic review 
process provided a mechanism for NASDAQ to promote, market, and expand 
the new Global Select tier to eligible companies. Now that companies 
are familiar with this process and also have an easy way to apply 
throughout the year, the Commission believes that it is consistent with 
the Act, and Section 6(b)(5) in particular, for NASDAQ no longer to 
offer this service to promote its Global Select tier. In addition, the 
Commission notes that it received no comments on the proposal, and thus 
is not aware of any objection to it from

[[Page 51385]]

interested parties, in particular, Global Market-listed companies. 
Moreover, eliminating the automatic review process, which NASDAQ has 
stated is a burden on its staff, could free up additional resources 
that may be better used for the regulation and oversight of listed 
companies.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NASDAQ-2014-067) be, and it 
hereby is, approved.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20465 Filed 8-27-14; 8:45 am]
BILLING CODE 8011-01-P