Document ID: SEC-2008-1453-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-10-23T04:00Z

[Federal Register: October 23, 2008 (Volume 73, Number 206)]
[Notices]               
[Page 63222-63224]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23oc08-113]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58809; File No. SR-NASDAQ-2008-082]

 
Self-Regulatory Organizations; the NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Temporarily Suspend, Through January 16, 2009, the Continued Listing 
Requirements Related to Bid Price and Market Value of Publicly Held 
Shares

October 17, 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 October 16, 2008, the NASDAQ Stock Market LLC (``Nasdaq'') 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. Nasdaq has designated the proposed rule 
change as effecting a change described under Rule 19b-4(f)(6) under the 
Act,\3\ which renders the proposal 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\ 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

    Nasdaq proposes to temporarily suspend, through January 16, 2009, 
the application of the continued listing requirements related to bid 
price and market value of publicly held shares.

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 such statements.

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

1. Purpose
    Given current market conditions, Nasdaq proposes to provide issuers 
of common stock, preferred stock, secondary classes of common stock, 
shares or certificates of beneficial interest of trusts, limited 
partnership interests, American Depositary Receipts, and their 
equivalents temporary relief from the continued inclusion bid price \4\ 
and market value of publicly held shares requirements.\5\
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    \4\ Nasdaq's continued listing requirements relating to bid 
price are set forth in Rules 4310(c)(4), 4320(e)(2)(E)(ii), 
4450(a)(5), 4450(b)(4), and 4450(h)(3) and the related compliance 
periods are set forth in Rules 4310(c)(8)(D), 4320(e)(2)(E)(ii), and 
4450(e)(2). Under these rules, a security is considered deficient if 
it fails to achieve at least a $1 closing bid price for a period of 
30 consecutive business days. Once deficient, Capital Market issuers 
are provided one automatic 180-day period to regain compliance. 
Thereafter, these issuers can receive an additional 180-day 
compliance period if they comply with all Capital Market initial 
inclusion requirements except bid price. Global Market issuers are 
also provided one automatic 180-day period to regain compliance, 
after which they can transfer to the Capital Market, if they comply 
with all Capital Market initial inclusion requirements except bid 
price, to take advantage of the second 180-day compliance period. A 
company can regain compliance by achieving a $1 closing bid price 
for a minimum of ten consecutive business days.
    \5\ Nasdaq's continued listing requirements relating to market 
value of publicly held shares are set forth in Rules 4310(c)(7), 
4320(e)(5), 4450(a)(2), 4450(b)(3) and 4450(h)(2) and the related 
compliance periods are set forth in Rules 4310(c)(8)(B) and 
4450(e)(1). Under these rules, a security is considered deficient if 
it fails to achieve the minimum market value of publicly held shares 
requirement for a period of 30 consecutive business days. 
Thereafter, companies have a compliance period of 90 calendar days 
to achieve compliance by meeting the applicable standard for a 
minimum of ten consecutive business days.
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    In the past several weeks, U.S. and world financial markets have 
faced

[[Page 63223]]

almost unprecedented turmoil, and the Commission has acknowledged in 
several recent emergency Orders that this turmoil has resulted in a 
crisis in investor confidence and concerns about the proper functioning 
of the securities markets.\6\ As a result, the number of securities 
trading below $1 has increased dramatically. For example, as of 
September 30, 2007, there were 64 securities trading below $1 on 
Nasdaq. By September 30, 2008, that number had increased to 227 and by 
October 9, 2008, there were 344 securities trading below $1 on Nasdaq 
and over another 300 Nasdaq-listed securities trading between $1 and 
$2.\7\ Nasdaq believes that during this time there was no fundamental 
change in the underlying business model or prospects for many of these 
companies, but the decline in general investor confidence has resulted 
in depressed pricing for companies that otherwise remain suitable for 
continued listing. These same conditions make it difficult for 
companies to successfully implement a plan to regain compliance with 
the price or market value of publicly held shares tests.
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    \6\ See, e.g., Securities Exchange Act Release No. 58588 
(September 18, 2008), 73 FR 55174 (September 24, 2008) (``The 
Commission is aware of the continued potential of sudden and 
excessive fluctuations of securities prices and disruption in the 
functioning of the securities markets that could threaten fair and 
orderly markets. Given the importance of confidence in our financial 
markets as a whole, we have also become concerned about sudden and 
unexplained declines in the prices of securities. Such price 
declines can give rise to questions about the underlying financial 
condition of an issuer, which in turn can create a crisis of 
confidence without a fundamental underlying basis. This crisis of 
confidence can impair the liquidity and ultimate viability of an 
issuer, with potentially broad market consequences.'').
    \7\ Similarly, from January 1, 2008, to September 30, 2008, the 
number of companies deficient in the market value of publicly held 
shares requirement more than doubled.
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    Given these extraordinary market conditions, Nasdaq has determined 
that the bid price and market value of publicly held shares 
requirements should be temporarily suspended through January 16, 
2009.\8\ Under this proposal, companies would not be cited for new bid 
price or market value of publicly held shares deficiencies during the 
suspension period, and the time allowed to companies already in a 
compliance period or in the hearings process for bid price or market 
value of publicly held shares deficiencies would be suspended with 
respect to those requirements.\9\ Following the temporary suspension, 
any new deficiencies with the bid price or market value of publicly 
held shares requirements would be determined using data starting on 
January 19, 2009.\10\ Companies that were in a compliance period prior 
to the suspension would receive the balance of any pending compliance 
periods in effect at the time of the suspension.\11\ Similarly, 
companies that were in the Hearings process prior to the suspension 
would resume in that process at the same stage they were in when the 
suspension went into effect. Nasdaq will continue to monitor securities 
to determine if they regain compliance during the temporary suspension.
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    \8\ In late 2001, in response to a continuing decline in the 
market, which was exacerbated by the tragic events of September 
11th, Nasdaq imposed a similar temporary suspension on delisting 
securities which were deficient in the bid price and market value of 
publicly held shares requirements. Securities Exchange Act Release 
No. 44857 (September 27, 2001), 66 FR 50485 (October 3, 2001) (SR-
NASD-2001-61).
    \9\ Nasdaq would continue to identify companies in a compliance 
period or in the hearings process as not satisfying the continued 
listing standards, unless the company regains compliance during the 
suspension. A company would continue to be subject to delisting for 
failure to comply with other listing requirements.
    \10\ Nasdaq would not consider the bid price or market value of 
publicly held shares for the period before or during the suspension 
with respect to a company that is not yet non-compliant with those 
requirements at the start of the suspension.
    \11\ For example, if a company is 120 days into its first 180-
day compliance period for a bid price deficiency when the suspension 
starts and the company does not regain compliance during the 
suspension, the company would have an additional sixty days starting 
on January 19, 2009, to regain compliance. The company may be 
eligible for the second 180-day compliance period if it satisfies 
the conditions for the second compliance period at the conclusion of 
the first compliance period.
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    Nasdaq believes that this temporary suspension will permit 
companies to focus on running their businesses, rather than satisfying 
market-based requirements that are largely beyond their control in the 
current environment. Moreover, this temporary suspension would allow 
investors to buy shares of some of these lower-priced securities 
without fear that the company will receive a delisting notification or 
be delisted in the very near term.\12\ During the temporary suspension, 
Nasdaq will consider whether it is appropriate to propose further 
revisions to these requirements.
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    \12\ As noted above, following the suspension, companies 
presently in the compliance process will remain at that same stage 
of the process.
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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,\13\ in general and with 
Sections 6(b)(5) of the Act,\14\ in particular in that it 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. The proposed rule change is 
designed to remove uncertainty regarding the ability of companies to 
remain listed on Nasdaq during this especially turbulent market 
environment, thereby protecting investors, facilitating transactions in 
securities, and removing an impediment to a free and open market.
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    \13\ 15 U.S.C. 78f.
    \14\ 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 were neither solicited nor received.

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

    Because 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, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \15\ and 
Rule 19b-4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange is required to give 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 Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \17\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \18\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has

[[Page 63224]]

requested that the Commission waive the 30-day operative delay.
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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow Nasdaq to immediately implement a temporary 
measure to suspend its continued listing requirements relating to bid 
price and market value of publicly held shares to respond to recent 
market volatility and conditions. The Commission notes that this will 
provide certain companies with immediate relief from receiving a 
deficiency or delisting notification, or from being delisted, as a 
result of the current market conditions. The Commission notes that this 
action is temporary in nature, and that following the suspension, 
companies currently in the compliance process or in the hearings 
process will resume at the same stage of the process if they remain 
non-compliant with these standards. This will ensure that the temporary 
suspension addresses the concerns to companies and investors caused by 
the current market conditions, and that may result in a company's 
securities becoming non-compliant with the bid price and market value 
of publicly held shares requirements, or unable to cure such a 
deficiency, due to these market conditions. For these reasons, the 
Commission designates that the proposed rule change become operative 
immediately upon filing.\19\
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    \19\ For purposes only of waiving the 30-day operative delay, 
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 the 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-2008-082 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2008-082. 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, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the 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-2008-082 and should be submitted on or before 
November 13, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8-25242 Filed 10-22-08; 8:45 am]

BILLING CODE 8011-01-P