[Federal Register Volume 75, Number 42 (Thursday, March 4, 2010)]
[Notices]
[Pages 9982-9985]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4411]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61594; File No. SR-NASDAQ-2010-024]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a Round Lot Holder Initial Listing Requirement for Listing of
Warrants on the Nasdaq Global and Capital Markets Except for Initial
Firm Commitment Underwritten Public Offering
February 25, 2010.
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 February 19, 2010, The NASDAQ Stock Market LLC (``NASDAQ'' or
``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 substantially prepared by NASDAQ.
NASDAQ has designated the proposed rule change as constituting a non-
controversial rule change 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 the
Substance of the Proposed Rule Change
NASDAQ is filing this proposed rule change to adopt a round lot
holder requirement for listing on the Global and Capital markets, and
to make a technical correction to a cross referenced rule.
The text of the proposed rule change is below. Proposed new
language is in italics and proposed deletions are in [brackets].
5410. Initial Listing Requirements for Rights and Warrants
For initial listing, the rights or warrants must meet all the
requirements below:
(a) No change.
(b) The underlying security must be listed on the Global Market or
be a Covered Security; [and]
(c) There must be at least three registered and active Market
Makers[.] ; and
(d) In the case of warrants, there must be at least 400 Round Lot
Holders (except that this requirement will not apply to the listing of
warrants in connection with the initial firm commitment underwritten
public offering of such warrants).
* * * * *
5515. Initial Listing Requirements for Rights, Warrants, and
Convertible Debt
The following requirements apply to a Company listing convertible
debt, rights or warrants on The Nasdaq Capital Market.
(a) For initial listing, rights, warrants and put warrants (that
is, instruments that grant the holder the right to sell to the issuing
company a specified number of shares of the Company's common stock, at
a specified price until a specified period of time) must meet the
following requirements:
(1) No change.
(2) The underlying security must be listed on Nasdaq or be a
Covered Security; [and]
(3) At least three registered and active Market Makers[.] ; and
(4) In the case of warrants, at least 400 Round Lot Holders (except
that this requirement will not apply to the listing of rights or
warrants in connection with the initial firm commitment underwritten
public offering of such warrants).
(b)-(c) No change.
* * * * *
5730. Listing Requirements for Securities Not Specified Above (Other
Securities)
(a) Initial Listing Requirements
[[Page 9983]]
(1) Nasdaq will consider listing on the Global Market any security
not otherwise covered by the criteria in the Rule 5400 or 5700 Series,
provided the instrument is otherwise suited to trade through the
facilities of Nasdaq. Such securities will be evaluated for listing
against the following criteria:
(A) The Company shall have assets in excess of $100 million and
stockholders' equity of at least $10 million. In the case of a Company
which is unable to satisfy the income criteria set forth in Rule
5405(b)(1)(A)[paragraph (a)(1)], Nasdaq generally will require the
Company to have the following:
(i)-(ii) No change.
(B)-(D) No change.
(2)-(3) No change.
(b) No change.
* * * * *
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
NASDAQ is proposing to adopt a round lot holder requirement for the
initial listing of warrants on the Global and Capital Markets, with a
limited exemption for companies listing warrants pursuant to a firm
commitment underwritten initial public offering.\4\ Currently, Listing
Rule 5410 provides that to list a warrant on the Global Market a
Company must have at least 450,000 warrants issued, the underlying
security must be listed on the Global Market or be a Covered Security
\5\, and there must be at least three registered and active Market
Makers. To list a warrant on the Capital Market, a Company must have at
least 400,000 warrants issued, the underlying security must be listed
on NASDAQ or be a Covered Security, and there must be at least three
registered and active Market Makers.\6\
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\4\ The Commission notes that the proposed changes to the Global
Market warrant holder requirement would apply to the Global Select
Market under Nasdaq Rule 5320, which provides that ``[i]f the
Primary Equity Security of a Company is included in the Global
Select Market, any other security of that same Company, such as
other classes of common or preferred stock, warrants and units, that
qualify for listing on the Global Market shall also be included in
the Global Select Market.''
\5\ Rule 5005(a)(9) defines a Covered Security as a security
described in Section 18(b) of the Securities Act of 1933.
\6\ Rule 5515(a).
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On March 12, 2009, NASDAQ filed a proposed rule change to revise
the rules relating to the qualification, listing, and delisting of
companies listed on, or applying to list on, NASDAQ to improve the
organization of the rules, eliminate redundancies and simplify the rule
language.\7\ These rules (the ``Listing Rules'') were operative April
13, 2009. In adopting the new Listing Rules, NASDAQ inadvertently
omitted the requirement in the prior rules that a warrant have at least
400 round lot holders for initial listing \8\ on the Global Market.
NASDAQ is proposing to modify Rule 5410 to add the round lot holder
requirement back to the rule.
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\7\ Securities Exchange Act Release No. 59663 (March 31, 2009),
74 FR 15552 (April 6, 2009)(SR-NASDAQ-2009-018).
\8\ Former Rule 4420(d)(1) required warrants to substantially
meet the requirements of the Global Market listing rules, which
included a minimum of 400 round lot shareholders under all three
entry standards.
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NASDAQ is also proposing to adopt an identical 400 round lot holder
requirement for the initial listing of warrants on the Capital Market.
NASDAQ does not currently have a holder requirement for listing
warrants on the Capital Market; however, NASDAQ believes that adopting
such a requirement will help ensure that warrants listed on the Capital
Market will have adequate distribution and a liquid trading market.
NASDAQ is proposing to adopt an exemption from the proposed round
lot holder requirements of both the Global and Capital Markets for
warrants listed pursuant to a firm commitment underwritten initial
public offering. NASDAQ believes that a primary purpose of distribution
requirements in listing standards is to ensure a liquid trading market,
promoting price discovery and the establishment of an appropriate
market price for the listed securities. In the case of warrants, NASDAQ
believes that this liquidity concern is partially addressed by the fact
that the market price for a warrant is in large part determined by the
trading price of the underlying common stock. Warrant values are
primarily determined using valuation models that factor in the trading
price of the underlying stock, the warrant exercise price and the
expiration date of the right or warrant. NASDAQ believes that the sale
of warrants in an underwritten public offering provides an additional
basis for believing that a liquid trading market will likely develop
for such warrants after listing, since the offering process is designed
to promote appropriate price discovery. Moreover, the underwriters in a
firm commitment underwritten public offering will also generally make a
market in the securities for a period of time after the offering,
assisting in the creation of a liquid trading market. For the foregoing
reasons, NASDAQ believes that it is consistent with the protection of
investors and the public interest to exempt from the proposed holder
requirements of Rules 5410 and 5515(a) any series of warrants that is
listed in connection with its initial firm commitment underwritten
public offering. This proposed exemption is also consistent with a
recent change to the listing requirements of the New York Stock
Exchange (``NYSE'').\9\
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\9\ See SR-NYSE-2009-115 (December 2, 2009), 74 FR 64781
(December 8, 2009) (amending Section 703.12 of the NYSE Listed
Company Manual to exempt from the 400 holders requirement any series
of warrants listed in connection with the initial firm commitment
underwritten public offering of such warrants).
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NASDAQ is not proposing to require a minimum number of holders for
the initial listing of rights, because rights are generally distributed
to the holders of an existing security and becomes a part of the
realizable value of that security. As such, because the existing
security must meet liquidity requirements, including a continued
listing holders requirement, there is not a need to require a separate
minimum number of holders of the rights to help ensure the liquidity of
the rights.\10\
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\10\ This is also consistent with the NYSE's treatment of
rights. See Section 703.03(N) of the NYSE Listed Company Manual.
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NASDAQ is also making a technical correction to a cross-reference
contained in the Listing Rules. Rule 5730(a)(1)(A) was derived from old
Rule 4420(d), which contained a cross reference to the Global Market
income criteria found under old Rule 4420(a)(1). Rule 4420(a)(1) was
moved to new Listing Rule 5405(b)(1)(A), yet the cross reference in
Rule 5730(a)(1)(A) was not updated to reflect this new location.
Accordingly, NASDAQ proposes to correct the reference in Rule
5730(a)(1)(A).
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the
[[Page 9984]]
provisions of Section 6 of the Act,\11\ in general and with Section
6(b)(5) of the Act,\12\ in particular in that it is 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. The proposed
rule change, which imposes a round lot holder requirement applicable to
the initial listing of warrants, subject to a limited exception for
warrants listed pursuant to firm commitment initial public offerings,
will protect investors and the public interest and remove impediments
to and perfect the mechanism of a free and open market by helping to
assure adequate liquidity, and correcting inadvertent errors in the
adoption of the New Listing Rules.
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\11\ 15 U.S.C. 78f.
\12\ 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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) \14\ thereunder
because the proposal does not: (i) Significantly affect the protection
of investors or the public interest; (ii) impose any significant burden
on competition; and (iii) by its terms, 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 the public interest.\15\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the Exchange to give the Commission written
notice of the Exchange's 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 the pre-filing requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \16\ 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 requested that the
Commission waive the 30-day operative delay period.
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\16\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiver of the 30-day operative delay
period is consistent with the protection of investors and the public
interest. For the Global Market, Nasdaq would require the same 400
round lot warrant holders requirement that was contained in the rules
for warrants prior to the reorganization of its Listing Rules. For the
Capital Market, Nasdaq is proposing an identical 400 round lot warrant
holders requirement as the Global Market. The Commission believes that
waiver of the 30-day operative delay period is consistent with the
protection of investors and the public interest as the proposed changes
should help to enhance liquidity and price discovery for warrants.
Further, for both the Global Market and the Capital Market, Nasdaq's
proposed exemption from the holder requirement for initial firm
commitment underwritten public offerings is identical to the rules of
the NYSE, which were published for notice and comment in the Federal
Register.\17\ The Commission did not receive any comments during the
public comment period. The Commission further notes that waiving the
30-day operative delay for this provision is consistent with the
protection of investors and the public interest as market making by the
underwriters in an initial firm commitment public offering of warrants
for a period of time after the offering should help alleviate short
term liquidity concerns.\18\ Finally, Nasdaq proposes to correct
inaccurate cross references in the Listing Rules. Based on the above,
the Commission believes it is consistent with the protection of
investors and the public interest to waive the 30-day operative delay
and therefore deems the proposal effective upon filing.\19\
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\17\ See note 9 supra.
\18\ As noted by Nasdaq, the price of such warrants would be
established by the firm commitment underwritten offering process, in
addition to the price of the underlying security, the exercise price
of the warrants, and the expiration of the warrants.
\19\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 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 proposed 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.\20\
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\20\ 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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 [email protected]. Please include
File Number SR-NASDAQ-2010-024 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-2010-024. 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 Web site
viewing and printing in the Commission's Public Reference Room 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 offices of the NASDAQ. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You
[[Page 9985]]
should submit only information that you wish to make available
publicly.
All submissions should refer to File Number SR-NASDAQ-2010-024, and
should be submitted on or before March 25, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-4411 Filed 3-3-10; 8:45 am]
BILLING CODE 8011-01-P