Document ID: SEC-2007-0951-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2007-07-13T04:00Z

[Federal Register: July 13, 2007 (Volume 72, Number 134)]
[Notices]               
[Page 38639-38641]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13jy07-125]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56028; File No. SR-NASDAQ-2007-031]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of a Proposed Rule Change Relating to Three-
Characters Ticker Symbols

July 9, 2007.

I. Introduction

    On March 29, 2007, The NASDAQ Stock Market LLC (``Nasdaq'') 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 allow an 
issuer with a three-character ticker symbol that transfers its listing 
to Nasdaq from another listing market to continue using its three-
character ticker symbol on Nasdaq. The proposed rule change was 
published for comment in the Federal Register on April 4, 2007.\3\
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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. 55563 (March 30, 
2007), 72 FR 16391.
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    The Commission received 24 comment letters on the proposal.\4\ On 
May 1, 2007, Nasdaq filed a response to the comment letters.\5\ This 
order approves the proposed rule change.
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    \4\ See letters from Edward J. Resch, Executive Vice President, 
Chief Financial Officer and Treasurer, State Street Corporation, 
dated May 21, 2007 (``State Street Letter''); Larry A. Mizel, 
Chairman and Chief Executive Officer, M.D.C. Holdings, Inc. (``MDC 
Letter''), dated May 17, 2007; Jack R. Hartung, Chief Finance and 
Development Officer, Chipotle Mexican Grill, dated May 15, 2007 
(``Chipotle Letter''); Carol R. Kaufman, Sr. Vice President Legal 
Affairs, The Cooper Companies, Inc., dated May 14, 2007 (``Cooper 
Companies Letter''); Farooq Kathwari, Chairman, President and CEO, 
Ethan Allen Interiors, Inc., dated May 9, 2007 (``Ethan Allen 
Letter''); James J. Angel, Associate Professor of Finance, McDonough 
School of Business, Georgetown University, dated May 9, 2007 
(``Angel Letter''); Jack Sennott, Senior Vice President and Chief 
Financial Officer, Darwin Professional Underwriters, Inc., dated May 
8, 2007 (``Darwin Letter''); Bart J. Ward, Chief Executive Officer, 
Ward & Company, dated May 8, 2007 (``Ward Letter''); Craig D. 
Mallick, Corporate Secretary, United States Steel Corporation, dated 
May 4, 2007 (``United States Steel Letter''); Michael Tenenbaum, 
Trustee, Strategic Technologies Employees Pension Fund Trust, dated 
May 2, 2007 (``Strategic Technologies Letter''); Carrie E. Dwyer, 
General Counsel and Executive Vice President Corporate Oversight, 
The Charles Schwab Corporation (``Schwab''), dated April 27, 2007 
(``Schwab Letter''); Mary Yeager, Assistant Secretary, New York 
Stock Exchange LLC (``NYSE''), dated April 25, 2007 (``NYSE 
Letter''); Patrick J. Healy, Issuer Advisory Group, dated April 24, 
2007 (``Issuer Advisory Group Letter''); Neal L. Wolkoff, Chairman 
and Chief Executive Officer, American Stock Exchange LLC (``Amex''), 
dated April 16, 2007 (``Amex Letter''); Eric W. Nodiff, Sr. V.P. and 
General Counsel, Cantel Medical Corp., dated April 9, 2007 (``Cantel 
Medical Letter''); Dave Patch, dated April 6, 2007 (``Patch 
Letter''); Steve S. Fishman, Chairman and Chief Executive Officer, 
Big Lots, Inc., dated April 4, 2007 (``Big Lots Letter''); David M. 
Brain, President and CEO, Entertainment Properties Trust, dated 
April 3, 2007 (``Entertainment Properties Trust Letter''); Cathy 
Burzik, President and Chief Executive Officer, Kinetic Concepts, 
Inc., dated March 30, 2007 (``Kinetic Concepts Letter''); Edward W. 
Moore, Vice President, General Counsel & Secretary, RPM 
International Inc., dated March 29, 2007 (``RPM Letter''); Leo 
Liebowitz, Chairman and Chief Executive Officer, Getty Realty Corp., 
dated March 29, 2007 (``Getty Realty Letter''); Timothy J. 
O'Donovan, Chairman of the Board and Chief Executive Officer, 
Wolverine World Wide, Inc., dated March 28, 2007 (``Wolverine World 
Wide Letter''); Jason Korstange, SVP, Director of Corporate 
Communications, TCF Financial Corporation, dated March 28, 2007 
(``TCF Financial Letter''); and Edward F. Tancer, Vice President & 
General Counsel, FPL Group, Inc., dated March 28, 2007 (``FPL Group 
Letter'').
    \5\ See letter from Joan C. Conley, Senior Vice President and 
Corporate Secretary, Nasdaq, to Nancy M. Morris, Secretary, 
Commission, dated May 1, 2007 (``Nasdaq Response Letter'').
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II. Description of the Proposal

    Historically, it has been the practice of NYSE, Amex, and the 
regional exchanges to list securities using three-character ticker 
symbols, and of Nasdaq to list securities using four- and five-
character symbols.\6\ Nasdaq recently submitted a proposed rule change 
to begin listing Delta Financial Corp., a security that transferred its 
listing from Amex, while retaining its three-character symbol 
(``DFC'').\7\
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    \6\ It has also been the practice of NYSE, Amex, and the 
regional exchanges to list securities using two-character ticker 
symbols. In addition, NYSE lists securities with one-character 
ticker symbols.
    \7\ See Securities Exchange Act Release No. 55519 (March 26, 
2007), 72 FR 15737 (April 2, 2007) (SR-NASDAQ-2007-025).
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    Nasdaq now proposes to allow any issuer with a three-character 
ticker symbol that transfers its listing to Nasdaq from another 
domestic listing market to continue using its three-character ticker 
symbol on Nasdaq.

III. Summary of Comments

    Four commenters expressed support for Nasdaq's proposal; \8\ the 
remaining 20 commenters, including 16 issuers listed on NYSE, objected 
to Nasdaq listing transferred securities with their three-character 
ticker symbols.\9\
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    \8\ See Angel Letter, Schwab Letter, Issuer Advisory Group 
Letter, and Patch Letter.
    \9\ See State Street Letter, MDC Letter, Chipotle Letter, Cooper 
Companies Letter, Ethan Allen Letter, Darwin Letter, Ward Letter, 
United States Steel Letter, Strategic Technologies Letter, NYSE 
Letter, Amex Letter, Cantel Medical Letter, Big Lots Letter, 
Entertainment Properties Trust Letter, Kinetic Concepts Letter, RPM 
Letter, Getty Realty Letter, Wolverine World Wide Letter, TCF 
Financial Letter, and FPL Group Letter.
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    The commenters objecting to the proposal generally argued that the 
proposal would violate the long-

[[Page 38640]]

standing practice of allowing only NYSE-listed securities to use three-
character ticker symbols,\10\ cause confusion in the marketplace,\11\ 
and circumvent the ongoing efforts of self-regulatory organizations 
(``SROs'') to develop a national market system plan for the selection 
and reservation of securities ticker symbols.\12\ In addition, two 
commenters argued that the proposal could cause a shortage of one-, 
two-, or three-character ticker symbols.\13\
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    \10\ Id.
    \11\ See Ward Letter, NYSE Letter, Amex Letter, Big Lots Letter, 
and Wolverine World Wide Letter.
    \12\ See Ward Letter, NYSE Letter, Amex Letter, and RPM Letter.
    \13\See NYSE Letter and Amex Letter. The Amex Letter, among 
other comment letters, expressed views on Nasdaq listing one- and 
two-character ticker symbols; however, this proposed rule change 
relates only to the transfer of three-character ticker symbol 
listings.
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    In support of the proposal, some commenters asserted that the 
proposal would enhance competition among markets and reduce the 
potential for investor confusion.\14\ In its letter, Nasdaq responded 
to the commenters, stating that it believed that many of the commenters 
opposing the proposal misunderstood its proposal and the current use of 
symbols by the securities markets, and reiterated its belief that the 
proposal would reduce investor confusion and promote competition among 
exchanges.\15\
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    \14\ See Angel Letter, Schwab Letter, and Issuer Advisory Group 
Letter.
    \15\ See Nasdaq Response Letter.
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IV. Discussion

    After a careful review of the proposed rule change, the comment 
letters, and the Nasdaq Response Letter, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
the regulations thereunder applicable to a national securities 
exchange.\16\ In particular, the Commission finds that the proposal is 
consistent with Section 6(b)(5) of the Act,\17\ which requires that the 
rules of a national securities exchange be designed, among other 
things, 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 Section 6(b)(8) of the Act,\18\ which requires 
that the rules of an exchange not impose any burden on competition that 
is not necessary or appropriate in furtherance of the Act.
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    \16\ In approving the proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 15 U.S.C. 78f(b)(8).
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A. Competition Among the Listing Markets

    The Commission notes that national securities exchanges often allow 
issuers to retain the ticker symbols that identify their securities 
when such issuers transfer their listings to another exchange, other 
than Nasdaq.\19\ This proposal would allow Nasdaq to participate in 
this existing practice, along with all other national securities 
exchanges, for issuers with three-character ticker symbols.\20\
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    \19\ See, e.g., Darwin Professional Underwriters (on April 18, 
2007, moved from NYSE Arca to NYSE and retaining its symbol DR) and 
Yamana Gold Inc. (on January 12, 2007, moved from Amex to NYSE and 
retaining its symbol AUY).
    \20\ Some of the commenters expressed views on Nasdaq listing 
one- and two-character ticker symbols; however, these considerations 
are beyond the scope of this proposed rule change, which covers only 
the transfer of three-character ticker symbols.
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    Nasdaq and the commenters supporting the proposal asserted that the 
proposed rule change would allow publicly-listed issuers to choose 
their marketplace based on objective factors such as trading quality, 
costs, and branding, and not based on symbol portability.\21\ 
Currently, an issuer deciding whether to transfer its listing to Nasdaq 
must consider, among other factors, the fact that it would need to 
change its ticker symbol. For example, the Schwab Letter stated that, 
when it considered transferring its listing to Nasdaq, the prospect of 
changing its symbol was a negative factor in its analysis regarding 
whether to transfer its listing. Schwab noted that the change in its 
ticker symbol, resulting from the transferring of its listing to 
Nasdaq, necessitated operational and systems changes at Schwab and 
industry-wide at other financial services firms and required the 
expenditure of other resources to inform its investors of that change.
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    \21\ See Issuer Advisory Group Letter and Nasdaq Response 
Letter.
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    The Commission notes that when an issuer is seeking to transfer its 
listing to an exchange other than Nasdaq, such issuer's analysis is not 
typically encumbered by considerations of changing its symbol and the 
attending administrative and other costs associated with that process. 
The proposed rule change would eliminate the considerations associated 
with changing its ticker symbol from the decision by an issuer 
identified by a three-character symbol to transfer its listing to 
Nasdaq.\22\ Thus, the Commission believes that the proposed rule 
change, by allowing issuers to retain their three-character ticker 
symbols upon transferring their listings to Nasdaq, would remove a 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act and would thereby enhance competition between 
Nasdaq and the other exchanges in the business of providing a listing 
venue.
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    \22\ Of course, an issuer could request a new ticker symbol if 
it so desired.
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B. Investor Confusion

    The Commission also believes that allowing an issuer to retain the 
three-character ticker symbol that identifies its security upon 
transferring its listing to Nasdaq does not increase, and may reduce, 
the potential for confusion in the marketplace by an issuer changing 
its ticker symbol. Commenters supporting the proposal asserted that 
changing an issuer's ticker symbol often results in investor confusion 
and costly investment mistakes.\23\ In its letter, Schwab stated that 
its ticker symbol change required it to expend time and resources to 
combat the confusion that the change would have caused among its 
individual stockholders who had come to identify it with its three-
character symbol. The Commission notes that issuers transferring their 
listings to exchanges other than Nasdaq typically avoid such confusion 
by retaining their ticker symbols.\24\
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    \23\ See Angel Letter, Issuer Advisory Group Letter, and Schwab 
Letter.
    \24\ The Nasdaq Response Letter stated that, of the 200 issuers 
transfers of existing three-character symbols since August 2001, all 
but one of those issuers have retained their symbols upon their 
transfer to a new exchange.
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    The commenters objecting to the proposal, however, asserted that 
the proposed rule change, for various reasons, would cause confusion in 
the marketplace. The majority of such commenters argued that three-
character ticker symbols are a hallmark of NYSE-listed securities \25\ 
and that, consequently, expanding the use of three-character ticker 
symbols to Nasdaq-listed securities would result in investor 
confusion.\26\ The Commission notes, however, that all of the

[[Page 38641]]

exchanges, except Nasdaq,\27\ may list securities using three-character 
ticker symbols.\28\ Unlike one-character symbols, three-character 
symbols are not associated by investors with any one market. The 
Commission also notes that the transfer of securities listings with 
three-character ticker symbols typically occur among other exchanges 
without any discernable confusion or disruption to the marketplace.\29\
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    \25\ Based on this premise, these commenters also argued that 
three-character ticker symbols signal NYSE's high qualitative 
listing standards and that allowing Nasdaq to list securities with 
three-character ticker symbols would blur the distinction between 
NYSE-listed and other exchange-listed securities and diminish the 
branding of NYSE-listed securities.
    \26\ See Strategic Technologies Letter, NYSE Letter, Cantel 
Medical Letter, Big Lots Letter, Kinetic Concepts Letter, RPM 
Letter, Getty Realty Letter, Wolverine World Wide Letter, TCF 
Financial Letter, and FPL Group Letter.
    \27\ With the exception of the transfer of the DFC listing, 
Nasdaq currently only lists securities of companies using four- or 
five-character symbols. See supra note 7 and accompanying text.
    \28\ For example, as noted in the Angel Letter, the NAIC Growth 
Fund lists on the Chicago Stock Exchange, Inc. with the ticker 
symbol ``GRF''.
    \29\ Nasdaq has also represented that its recent listing of DFC 
occurred without any trading problems. The Amex Letter tacitly 
agreed with this view, but argued that the lack of trading problems 
associated with DFC is not the best proxy for other companies that 
may transfer their listings to Nasdaq because it believed that DFC 
is a microcap company. The Nasdaq Response Letter, however, disputed 
this argument and the Amex Letter's labeling of DFC as a ``microcap 
company,'' citing the fact that DFC has a market capitalization of 
over $230 million, a figure that it contends is nearly triple the 
$67 million market capitalization of the median Amex issuer.
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    Another commenter asserted that three-character symbols are 
exclusive indicators of securities trading on NYSE's and Amex's 
specialist-based markets, and that it would cause confusion if such 
symbols were used on Nasdaq's dealer market.\30\ However, as the 
Commission noted above, exchanges other than NYSE and Amex may list 
securities with three-character symbols.\31\
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    \30\ See Amex Letter.
    \31\ For example, NYSE Arca lists three-character symbols. See 
also supra note 27.
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C. National Market System Plan Process

    Some of the commenters have expressed concern that the proposed 
rule change would disrupt or circumvent ongoing efforts by the SROs to 
develop a national market system plan.\32\ The Commission recently 
received two proposed national market system plans for the selection 
and reservation of ticker symbols submitted by two separate groups of 
SROs.\33\ The Commission is currently considering these plans and 
intends to publish the proposed plans for public comment.\34\ The 
Commission believes that its approval of the proposed rule change is 
independent of its consideration of these plans. The Commission under 
Rule 608(b)(2) may declare effective any national market system plan or 
plans for the selection and reservation of ticker symbols that is 
consistent with the requirements of the Act. Participants in any such 
plan would be required to comply with its requirements, which could 
necessitate changes to SRO rules.\35\
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    \32\ See Ward Letter, NYSE Letter, Amex Letter, and RPM Letter.
    \33\ See Proposed NMS Plan for the Selection and Reservation of 
Securities Symbols by the Chicago Stock Exchange, Inc., Nasdaq, 
National Association of Securities Dealers, Inc., National Stock 
Exchange, Inc. and Philadelphia Stock Exchange, Inc. (available at 
http://www.sec.gov/rules/sro/4-533revised.pdf) and Proposed NMS Plan 

for the Selection and Reservation of Securities Symbols by Amex, 
NYSE and NYSE Arca (available at http://www.sec.gov/rules/sro/4-534.pdf
).

    \34\ See Press Release, Commission, SEC Announces Process for 
Proposals on Securities `Ticker' Symbols (April 5, 2007) (available 
at http://www.sec.gov/news/press/2007/2007-63.htm).

    \35\ See 15 U.S.C. 78k-1(a)(3) and 17 CFR 242.608(b) and (c). 
The NYSE Letter referenced a ``Symbol Reservation Plan,'' which it 
stated has operated to allocate and reserve symbols for over 30 
years. The Commission notes, however, that no such plan has been 
approved by the Commission.
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D. Symbol Shortage

    Two commenters argued that the proposal could create a shortage of 
available three-character ticker symbols.\36\ Nasdaq's proposal, 
however, would only permit it to list securities with three-character 
ticker symbols when such issuer transfers its listing from another 
exchange; the proposal would not permit Nasdaq to list new securities 
with three-character ticker symbols. The Commission, therefore, does 
not believe Nasdaq's proposal would have a negative impact on the 
availability of three-character ticker symbols.
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    \36\ See NYSE Letter and Amex Letter.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\37\ that the proposed rule change (SR-NASDAQ-2007-031) be, and 
hereby is, approved.
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    \37\ 15 U.S.C. 78s(b)(2).

    By the Commission.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-13578 Filed 7-12-07; 8:45 am]

BILLING CODE 8010-01-P