[Federal Register Volume 76, Number 105 (Wednesday, June 1, 2011)]
[Notices]
[Pages 31660-31666]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-13422]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64546; File No. SR-BATS-2011-018]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing of Proposed Rule Change To Adopt Rules for the Qualification,
Listing and Delisting of Companies on the Exchange
May 25, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 12, 2011, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
[[Page 31661]]
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt rules for the qualification, listing
and delisting of companies on the Exchange.
The text of the proposed rule change is available at the Exchange's
Web site at http://www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
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 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 Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing rules to adopt a program for the
qualification, listing and delisting of companies on the Exchange
(``Listing Rules''). The Exchange proposes to eliminate the Exchange's
current rules related to securities traded on BATS pursuant to unlisted
trading privileges, and to replace such rules with the Listing Rules,
which are primarily based on and substantially similar to the rules of
the NASDAQ Stock Market LLC (``Nasdaq''). The Exchange is not proposing
any changes to the Rules of the Exchange's options market (``BATS
Options'').
The Exchange proposes adoption of two distinct tiers of securities
to be listed on the Exchange, Tier I and Tier II. The proposed
standards for a security's initial and continued listing on Tier I are
nearly identical to the existing standards applicable to listing on the
Nasdaq Global Market (``NGM''). The proposed standards for a security's
initial and continued listing on Tier II are nearly identical to the
existing standards applicable to listing on the Nasdaq Capital Market
(``NCM''). While the quantitative standards for Tier I and II differ,
the qualitative standards for both tiers are the same, and are based on
Nasdaq's existing qualitative standards, as described in further detail
below. The Exchange notes that it has not proposed adoption of a tier
equivalent to the Nasdaq Global Select Market tier, which is governed
by the Rule 5300 Series of Nasdaq rules.
In addition to deletion of the Exchange's current Chapter XIV and
adoption of the Rules described below, the Exchange proposes to modify
a cross-reference in Rule 3.21 to align such reference to the new
location of the defined term ``UTP Derivative Securities.''
Organization
As proposed, Rule 14.1 contains definitions for the rules related
to the qualification, listing and delisting of Companies on the
Exchange; \3\ Rule 14.2 discusses the Exchange's general regulatory
authority; Rule 14.3 sets forth the procedures and prerequisites for
gaining a listing on the Exchange; Rules 14.4 and 14.5 contain the
listing requirements for units; Rule 14.6 sets forth the disclosure
obligations of listed Companies; Rule 14.7 describes Direct
Registration Program requirements; Rules 14.8 and 14.9 contain the
specific and quantitative listing requirements for listing on the
Exchange in Tiers I and II, respectively; Rule 14.10 contains the
corporate governance requirements applicable to all Companies; Rule
14.11 contains special listing requirements for securities other than
common or preferred stock and warrants; Rule 14.12 contains the
consequences of a failure to meet the Exchange's listing standards; and
Rule 14.13 contains Exchange listing fees.
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\3\ For purposes of the proposed rules, any issuer of a security
listed or applying to list on the Exchange, including an issuer that
is not incorporated (e.g., a limited partnership) will be defined as
a ``Company.''
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General Regulatory Authority of the Exchange
As proposed, Rule 14.2 makes clear that the Exchange, in addition
to applying the enumerated criteria set forth in Chapter XIV, has broad
discretionary authority over the initial and continued listing of
securities on the Exchange in order to maintain the quality of and
public confidence in its market, to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
and to protect investors and the public interest. The Exchange may use
such discretion to deny initial listing, apply additional or more
stringent criteria for the initial or continued listing of particular
securities, or suspend or delist particular securities based on any
event, condition, or circumstance that exists or occurs that makes
initial or continued listing of the securities on the Exchange
inadvisable or unwarranted in the opinion of the Exchange, even though
the securities meet all enumerated criteria for initial or continued
listing on the Exchange.
Rule 14.2 provides Companies with guidance regarding the
circumstances in which the Exchange's use of discretionary authority is
invoked and the types of factors considered by the Exchange when making
determinations pursuant to such authority. In addition, Rule 14.2 sets
forth the Exchange's use of discretionary authority as it relates to a
Company whose business plan is to complete an initial public offering
and engage in a merger or acquisition with one or more unidentified
companies within a specific period of time. The Exchange will permit
the listing of such a Company if the Company meets all applicable
initial listing requirements, as well as the conditions described in
Rule 14.2. In addition, Rule 14.2 addresses the Exchange's use of
authority when a Company files for protection under any provision of
the federal bankruptcy laws or comparable foreign laws.
General Procedures and Prerequisites for Listing
Proposed Rule 14.3 describes the application process that a Company
must complete in order to be listed on the Exchange. To apply for
listing on the Exchange, a Company shall execute a Listing Agreement
and a Listing Application on forms made available by the Exchange in
order to provide the information required by Section 12(b) of the
Act.\4\ A Company's qualifications will be determined on the basis of
financial statements that are either: (i) Prepared in accordance with
U.S. generally accepted accounting principles; or (ii) reconciled to
U.S. generally accepted accounting principles as required by the
Commission's rules; or (iii) prepared in accordance with International
Financial Reporting Standards, as issued by the International
Accounting Standards Board, for Companies that are permitted to file
financial statements using those standards consistent with the
Commission's rules.
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\4\ 15 U.S.C. 78l(b).
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[[Page 31662]]
Rule 14.3 also sets forth the prerequisites for an applicant
Company to become listed on the Exchange: (1) The security must be
registered pursuant to Section 12(b) of the Act \5\ or subject to an
applicable exemption; (2) the Company must be audited by a registered
independent public accountant; (3) the securities must be eligible for
a Direct Registration Program operated by a clearing agency registered
under Section 17A of the Act,\6\ subject to certain exceptions; (4) the
Company must pay fees required by Rule 14.13; (5) the securities must
be in good standing with the Commission or Other Regulatory Authority;
\7\ (6) the Exchange shall certify to the Commission, and the
securities must become effective, pursuant to the Section 12(d) of the
Act; \8\ and (7) the securities must be depositary eligible pursuant to
the rules and procedures of a securities depository registered as a
clearing agency under Section 17A of the Act \9\ (``Securities
Depositary'').
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\5\ 15 U.S.C. 78l(b).
\6\ 15 U.S.C. 78q-1.
\7\ As defined in proposed Rule 14.1(t).
\8\ 15 U.S.C. 78l(d).
\9\ 15 U.S.C. 78q-1.
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To foster competition among markets and further the development of
the national market system, pursuant to Rule 14.13, the Exchange shall
permit Companies whose securities are listed on another national
securities exchange to apply also to list those securities on the
Exchange. The Exchange shall make an independent determination of
whether such Companies satisfy all applicable listing requirements and
shall require Companies to enter into a dual listing agreement with the
Exchange.
While the Exchange shall certify such dually listed securities for
listing on the Exchange, the Exchange shall not exercise its authority
under Rule 14.3(d) separately to designate or register such dually
listed securities as Exchange national market system securities within
the meaning of Section 11A of the Act or the rules thereunder. As a
result, these securities, which are already designated as national
market system securities under the Consolidated Quotation Service
(``CQS'') and Consolidated Tape Association national market system
plans (``CQ and CTA Plans'') or the Nasdaq Unlisted Trading Privileges
national market system plan (``UTP Plan''), as applicable, shall remain
subject to those plans. For purposes of the national market system,
such securities shall continue to trade under their current ticker
symbol. The Exchange shall continue to send all quotations and
transaction reports in such securities to the processor for the CTA
Plan or UTP Plan, as applicable.
Disclosure Obligations
Proposed Rule 14.6 in order to set forth the requirements of a
Company to provide information to the Exchange, file financial reports
and other documentation required pursuant to the Securities Act of 1933
and the rules and regulations thereunder, and make public disclosures,
including disclosures required pursuant to Regulation FD.\10\ Such
requirements include providing the Exchange's Surveillance Department
with notification prior to public release of material information. In
addition, Rule 14.6 sets forth obligations regarding notification to
the Exchange of an administrative nature and also regarding corporate
actions, such as reverse stock splits and changes to the Company's
state of incorporation. The Exchange has also proposed two
Interpretations and Policies to provide Companies with additional
guidance due to the importance that Companies provide prompt and
complete notifications. Such notice is critical to the proper
functioning of the capital markets and to investor confidence.
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\10\ 17 CFR 243.100 et seq.
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Quantitative Listing Requirements and Standards for Tier I Securities
The Exchange has proposed to divide the quantitative listing
standards into two subcategories in the proposed rules: listing
requirements and listing standards. Under the proposed rules, listing
requirements are quantitative metrics, all of which a Company must meet
for initial or continued listing on a particular tier. Listing
standards consist of bundles of quantitative metrics; however, unlike
listing requirements, a Company must meet at least one listing standard
to become listed or to continue listing.
The specific quantitative listing standards for both Tier I and
Tier II securities proposed by the Exchange are described below.
Primary Equity Securities--Initial Listing Requirements and Standards
BATS proposes to adopt quantitative initial listing requirements
pertaining to the public float, distribution of shares, and trading
volume of the security identical to the requirements of NGM.
Specifically, as set forth in proposed Rule 14.8(b), a Company must
have at a minimum a bid price of at least $4 per share, a minimum of
1.1 million publicly held shares, and at least 400 round lot holders.
BATS also proposes to require that the issuer of the security meet
at least one of the following standards--income, equity, market value,
or total assets/total revenue. Each of these standards, described
below, is identical to the comparable NGM standard set forth in Nasdaq
Rule 5405(b).
The income standard of Rule 14.8(b)(2)(A) would require that the
issuer have annual pre-tax income from continuing operations of at
least $1 million in the most recently completed fiscal year or in two
of the three most recently completed fiscal years, $15 million in
stockholders' equity, $8 million in market value of publicly held
shares, and at least three registered and active Market Makers.\11\
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\11\ The term Market Maker means a Member that acts as a Market
Maker on BATS pursuant to Chapter XI of the Exchange's rules.
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The equity standard of Rule 14.8(b)(2)(B) would require that
stockholder's equity be at least $30 million, the issuer have a two
year operating history, that the market value of publicly held shares
be at least $18 million, and at least three registered and active
Market Makers.
The market value standard of Rule 14.8(b)(2)(C), for currently
publicly traded companies, would require that the market value of
listed securities be at least $75 million, that the market value of
publicly held shares be at least $20 million, and at least four
registered and active Market Makers.
Finally, the total assets/total revenue standard of Rule
14.8(b)(2)(D) would require that total assets and total revenue for the
most recent fiscal year and two of the three most recently completed
fiscal years be at least $75 million, that the market value of publicly
held shares be at least $20 million, and at least four registered and
active Market Makers.
Rights and Warrants, Preferred Stock and Secondary Classes of Common
Stock--Initial Listing Requirements and Standards
As is true for primary equity securities, BATS proposes to adopt
requirements and standards nearly identical to those of NGM as the Tier
I quantitative initial listing requirements and standards for rights
and warrants and preferred stock and secondary classes of common stock,
as further described below.\12\
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\12\ See Nasdaq Rules 5410 and 5415.
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BATS proposes to require through Rule 14.8(c)(1) that for initial
listing at least 450,000 rights or warrants be issued and that the
underlying security be listed on the respective exchange or
[[Page 31663]]
be a covered security. BATS would also require that for warrants there
must be at least 400 round lot holders. Finally, BATS would require at
least three registered and active Market Makers.
Pursuant to Rule 14.8(d)(1), BATS would require that when the
primary equity security of an issuer is listed on the respective
exchange or is a covered security, the preferred stock or secondary
classes of common stock meet certain similar requirements. Rule
14.8(d)(1) would also require that there be at least 200,000 publicly
held shares with a market value of at least $4 million, a minimum bid
price of at least $4 per share, at least 100 round lot holders, and at
least three registered and active Market Makers.
In the event the Company's Primary Equity Security is not listed on
the Exchange as a Tier I security or is not a Covered Security, the
Exchange proposes that the preferred stock and/or secondary class of
common stock be listed on the Exchange as a Tier I security so long as
the security has met the initial listing criteria for Primary Equity
Securities as set forth in Rule 14.8(b).
Units--Initial Listing and Maintenance Requirements
In addition, the Exchange has proposed a stand-alone rule
applicable to the listing of units as Tier I securities, Rule 14.4.
Pursuant to Rule 14.4, all units shall have at least one equity
component. All components of such units shall satisfy the requirements
for initial and continued listing as Tier I securities, or, in the case
of debt components, satisfy the requirements described below.
All debt components of a unit, if any, shall meet the following
requirements: (A) The debt issue must have an aggregate market value or
principal amount of at least $5 million; (B) the issuer of the debt
security must have equity securities listed on the Exchange as a Tier I
security; and (C) in the case of convertible debt, the equity into
which the debt is convertible must itself be subject to real-time last
sale reporting in the United States, and the convertible debt must not
contain a provision which gives the company the right, at its
discretion, to reduce the conversion price for periods of time or from
time to time unless the company establishes a minimum period of ten
business days within which such price reduction will be in effect.
Finally, all components of the unit shall be issued by the same issuer.
All units and issuers of such units shall comply with the initial and
continued listing requirements of Tier I.
For initial inclusion, a unit shall have at least three registered
and active Market Makers. For continued listing, a unit shall have at
least two registered and active Market Makers, one of which may be a
Market Maker entering a stabilizing bid.
Primary Equity Securities--Maintenance Requirements and Standards
As with initial listing requirements and standards, BATS has
proposed quantitative maintenance requirements based on the maintenance
requirements and standards applicable to NGM listed issues.\13\ For
continued approval of a primary equity security listing, BATS Rule
14.8(e)(1) would require that there be a minimum bid price of $1 per
share and at least 400 total holders. BATS would also require, under
14.8(e)(2) that issuers meet at least one of the following standards--
equity, market value, or total assets/total revenue. The equity
standard would require that stockholders' equity be at least $10
million, that there be at least 750,000 publicly held shares with a
market value of at least $5 million, and that there be at least two
registered and active Market Makers. The market value standard would
require that the market value of listed securities be at least $50
million, that there be at least 1.1 million publicly held shares with a
market value of at least $15 million, and that there be at least two
registered and active Market Makers. The total assets/total revenue
standards would require that there be total assets and total revenue of
at least $50 million each for the most recently completed fiscal year
or two of the three most recently completed fiscal years, at least 1.1
million publicly held shares with market value of at least $15 million,
and at least four registered and active Market Makers.
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\13\ See Nasdaq Rule 5450(b).
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Rights and Warrants, Preferred Stock and Secondary Classes of Common
Stock--Maintenance Requirements
The Exchange proposes to adopt, as Rules 14.8(f) through (g),
continued listing requirements nearly identical to those set forth in
Nasdaq rules 5455 through 5460 for rights and warrants, and for
preferred stock and secondary classes of common stock. The Exchange
proposes to require that for continued listing, the rights or warrants
continue to be listed on the Exchange as a Tier I security or be a
Covered Security; and that there be at least two registered and active
Market Makers, one of which may be a Market Maker entering a
stabilizing bid. The Exchange also proposes as Continued Listing
Requirements for Preferred Stock and Secondary Classes of Common Stock
that the Company's Primary Equity Security of the Company be listed on
the Exchange as a Tier I security or as a Covered Security. The
Exchange proposes that the preferred stock or secondary class of common
stock have at least 100,000 Publicly Held Shares, a Market Value of
Publicly Held Shares of at least $1,000,000; a minimum bid price of at
least $1 per share; at least 100 Public Holders; and at least two
registered and active Market Makers.
In the event the Company's Primary Equity Security is not listed on
the Exchange as a Tier I security or is not a Covered Security, the
Exchange proposes that the preferred stock and/or secondary class of
common stock may continue to be listed on the Exchange as a Tier I
security so long as the security has met the continued listing criteria
for Primary Equity Securities as set forth in Rule 14.8(e).
Quantitative Listing Requirements and Standards for Tier II Securities
Primary Equity Securities--Initial Listing Requirements and Standards
BATS proposes to adopt quantitative initial listing requirements
pertaining to the public float, distribution of shares, and trading
volume of the security identical to the requirements of NCM.\14\
Specifically, as set forth in proposed Rule 14.9(b)(1), a Company must
have at a minimum bid price of at least $4 per share, a minimum of one
million publicly held shares, at least 300 round lot holders, and at
least three registered and active Market Makers. BATS would also
require that in the case of ADRs there be at least 400,000 issued.
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\14\ See Nasdaq Rule 5505.
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The Exchange would require in Rule 14.9(b)(2) that the issuer of
the security meets at least one of the following identical standards--
equity, market value, or net income.
The proposed equity standard would require stockholders' equity of
at least $5 million, that the market value of publicly held shares be
at least $15 million, and a two year operating history. The proposed
market value standard would require that the market value of listed
securities be at least $50 million, that stockholders' equity be at
least $4 million, and that the market value of publicly held shares be
at least $15 million. The proposed net income standard requires that
the net income from continuing operations be at least $750,000 in the
most recently
[[Page 31664]]
completed fiscal year or in two of the three most recently completed
fiscal years, that stockholders' equity be at least $4 million, and
that the market value of publicly held shares be at least $5 million.
Preferred Stock and Secondary Classes of Common Stock; Rights,
Warrants, and Convertible Debt--Initial Listing Requirements
As is true for primary equity securities, BATS proposes to adopt
requirements nearly identical to those of NCM as Tier II quantitative
initial listing requirements for preferred stock and secondary classes
of common stock as well as for rights, warrants, and convertible debt,
as further described below.\15\
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\15\ See Nasdaq Rules 5510 and 5515.
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Pursuant to Rule 14.9(c), BATS would require that when the primary
equity security of an issuer is listed on the respective exchange or is
a covered security, the preferred stock or secondary classes of common
stock meet certain similar requirements. Rule 14.9(c)(1) would also
require that there be at least 200,000 publicly held shares with a
market value of at least $3.5 million, a minimum bid price of at least
$4 per share, at least 100 round lot holders, and at least three
registered and active Market Makers.\16\
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\16\ See Nasdaq Rule 5510(a).
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In the event the Company's Primary Equity Security is not listed on
the Exchange as a Tier II security or is not a Covered Security, the
Exchange proposes that the preferred stock and/or secondary class of
common stock be listed on the Exchange as a Tier II security so long as
the security has met the initial listing criteria for Primary Equity
Securities as set forth in Rule 14.9(b).
BATS proposes to require through Rule 14.9(d)(1) that for initial
listing, rights, warrants, and put warrants meet certain similar
requirements. BATS would also require that there be at least 400,000
issued and that the underlying security be listed on the Exchange or be
a covered security. In the case of warrants, Rule 14.9(d)(1) would
require there be at least 400 round lot holders, and at least three
registered and active Market Makers.\17\
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\17\ See Nasdaq Rule 5515(a).
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For initial listing of convertible debt securities, BATS Rule
14.9(d)(2)(A) would require that the principal amount outstanding be at
least $10 million, that the current last sale information be available
in the United States with respect to the underlying security into which
the bond or debenture is convertible, and at least three registered and
active Market Makers.\18\ In addition to these conditions, the Exchange
proposes to require that issuers also meet one of the following
conditions: (i) That the issuer of the debt have an equity security
that is listed on BATS, Nasdaq, Amex, or the NYSE, or (ii) that an
issuer whose equity security is listed on BATS, Nasdaq, Amex, or the
NYSE directly or indirectly owns a majority interest in, or is under
common control with, the issuer of the debt security, or has guaranteed
the debt security, or (iii) a nationally recognized securities rating
organization (an ``NRSRO'') has assigned a current rating to the debt
security that is no lower than an S&P Corporation ``B'' rating or
equivalent rating by another NRSRO; or (iv) if no NRSRO has assigned a
rating to the issue, an NRSRO has currently assigned: (a) an investment
grade rating to an immediately senior issue; or (b) a rating that is no
lower than an S&P Corporation ``B'' rating, or an equivalent rating by
another NRSRO, to a pari passu or junior issue.\19\
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\18\ See Nasdaq Rule 5515(b).
\19\ See Nasdaq Rule 5515(b)(4).
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For initial listing of index warrants, Rule 14.9(d)(3) would
require that the minimum public distribution be at least 1 million
warrants, that there be a minimum of 400 public holders, that the
market value of the index warrants be at least $4 million, and that the
issuer have a minimum tangible net worth in excess of $150 million.
This requirement is nearly identical to the corollary NCM
requirement.\20\
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\20\ See Nasdaq Rule 5515(c).
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Units--Initial Listing and Maintenance Requirements and Standards
In addition, the Exchange has proposed a stand-alone rule
applicable to the listing of units as Tier II securities, Rule 14.5.
Pursuant to Rule 14.5, all component parts of units shall meet the Tier
II requirements for initial and continued listing. Further, the minimum
period for listing of the units shall be 30 days from the first day of
listing, except the period may be shortened if the units are suspended
or withdrawn for regulatory purposes. Companies and underwriters
seeking to withdraw units from listing must provide the Exchange with
notice of such intent at least 15 days prior to withdrawal.
For initial inclusion, a unit shall have at least three registered
and active Market Makers. For continued listing, a unit shall have at
least two registered and active Market Makers, one of which may be a
Market Maker entering a stabilizing bid.
Primary Equity Securities--Maintenance Requirements and Standards
As with initial listing standards, BATS has proposed quantitative
maintenance requirements based on the maintenance requirements
applicable to NCM listed issues. For continued approval of a primary
equity security listing, BATS Rule 14.9(e)(2) would require a minimum
bid price of $1 per share, at least 300 public holders, at least
500,000 publicly held shares with a market value of at least $1
million, and at least two registered and active Market Makers, one of
which may be a Market Maker entering a stabilizing bid.\21\
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\21\ See Nasdaq Rule 5550(b).
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Pursuant to Rule 14.9(e)(2), BATS would require that issuers meet
at least one of the following standards--equity, market value, or net
income. Under the equity standard, BATS would require that
stockholders' equity be at least $2.5 million. The market value
standard would require that the market value of listed securities be at
least $35 million. The net income standard would require net income
from continuing operations of $500,000 in the most recently completed
fiscal year or in two of the three most recently completed fiscal
years.
Preferred Stock and Secondary Classes of Common Stock; Rights,
Warrants, and Convertible Debt--Maintenance Requirements
The Exchange proposes to adopt, as Rules 14.9(f) through (g),
continued listing requirements nearly identical to those set forth in
Nasdaq rules 5455 through 5460 for Preferred Stock and Secondary
Classes of Common Stock; Rights, Warrants, and Convertible Debt.
The Exchange proposes Continued Listing Requirements for Preferred
Stock and Secondary Classes of Common Stock require that when the
Primary Equity Security is listed on the Exchange as a Tier II security
or is a Covered Security, a Company's preferred stock or secondary
class of common stock have a minimum bid price of at least $1 per
share; at least 100 Public Holders; at least 100,000 Publicly Held
Shares; a Market Value of Publicly Held Shares of at least $1 million;
and at least two registered and active Market Makers, one of which may
be a Market Maker entering a stabilizing bid.
In the event the Company's Primary Equity Security is not listed on
the Exchange as a Tier II security or is not
[[Page 31665]]
a Covered Security, the Exchange proposes that the preferred stock and/
or secondary class of common stock be listed on the Exchange as a Tier
II security so long as the security has met the criteria of the
continued listing of Primary Equity Securities as set forth in Rule
14.9(e).
The Exchange also proposes for Continued Listing Requirements for
Rights, Warrants, and Convertible Debt to require that for 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), the underlying security remains listed on the Exchange
or be a Covered Security, and there be at least two registered and
active Market Makers, one of which may be a Market Maker entering a
stabilizing bid.
For Continued Listing Requirements and Convertible Debt Securities
the Exchange proposes a principal amount outstanding of at least $5
million; at least two registered and active Market Makers, one of which
may be a Market Maker entering a stabilizing bid; and current last sale
information available in the United States with respect to the
underlying security into which the bond or debenture is convertible.
Corporate Governance Standards
In addition to having quantitative listing criteria based on the
standards applicable to Nasdaq listed companies, particularly those
designated as NGM or NCM securities, BATS has proposed nearly identical
qualitative requirements. Specifically, the Exchange proposes to adopt
in Rule 14.10 corporate governance requirements and related
interpretations that are nearly identical to the Rule 5600 Series of
Nasdaq. Such requirements relate to a Company's board of directors,
audit committee requirements, Independent Director oversight of
executive compensation, the director nomination process, a mandatory
code of conduct, shareholder meetings, including proxy solicitation and
quorum, review of related party transactions, and shareholder approval,
including voting rights. In addition to the proposed Rule 14.10, the
Exchange proposes to adopt interpretations and policies equivalent to
Nasdaq interpretive material. Such interpretations and policies provide
guidance regarding definitions other matters set forth in Rule 14.10.
Exemptions to the proposed corporate governance requirements, including
phase-in schedules, are set forth in paragraph (e) of proposed Rule
14.10. The Exchange believes that preliminarily adopting uniform
corporate governance standards to those of Nasdaq will assist issuers
and their advisors in determining the Exchange's requirements.
Listing Standards for Other Securities
In addition, the Exchange has proposed Rule 14.11 as a stand-alone
section for listing standards applicable to ``other securities,'' which
includes listing requirements for Exchange Traded Funds, Index-Linked
Securities, Selected Equity-linked Debt Securities, Trust Issued
Receipts, and Index Warrants. The proposed standards for Rule 14.11 are
both similar to BATS' current standards, applicable to securities
traded on the Exchange pursuant to unlisted trading privileges, as well
as Nasdaq Rules 4700 through 4730.
Failure To Meet Listing Standards
Securities of a Company that does not meet the listing standards
set forth in proposed Chapter XIV are subject to delisting from, or
denial of initial listing on the Exchange. Proposed Rule 14.12 sets
forth procedures for the independent review, suspension, and delisting
of Companies that fail to satisfy one or more standards for initial or
continued listing, and thus are ``deficient'' with respect to the
listing standards.
The Listings Qualifications Department will be responsible for
identifying deficiencies that may lead to delisting or denial of a
listing application; notifying the Company of the deficiency or denial;
and issuing Staff Delisting Determinations and Public Reprimand
Letters. Rule 14.12(c) contains provisions regarding the Listing
Qualifications Department's process for notifying Companies of
different types of deficiencies and their corresponding consequences.
The proposed rule also sets forth the various responsibilities when in
receipt of notice of a deficiency, including public notification
responsibilities.
The Hearings Panel, upon timely request by a Company, will review a
Staff Delisting Determination, denial of a listing application, or
Public Reprimand Letter at an oral or written hearing, and issue a
Decision that may, among other things, grant an ``exception'' to the
Exchange's listing standards or affirm a delisting. The Exchange
Listing and Hearings Review Council, upon timely appeal by a Company or
on its own initiative, may review the Decisions of the Hearings Panel.
Rule 14.12(e) contains provisions relating to the Listing Council
appeal process. Finally, the Exchange Board of Directors may exercise
discretion to call for review a Listing Council Decision.
Rule 14.12 also sets forth the procedures related to SEC
notification of the Exchange's final Delisting Determinations, rules
applicable to Adjudicators and Advisors, and general information
relating to the adjudicatory process.
A Company's failure to maintain compliance with the applicable
provisions of Chapter XIV will result in the termination of the listing
unless an exception is granted to the Company. The termination of the
Company's listing will become effective in accordance with the
procedures set forth herein, including Rule 14.12(g).
Listing Fees
The Exchange proposes to commence its listings business by charging
Initial Listing Fees of $100,000 and $50,000 for Tiers I and II,
respectively. The initial primary listing fee for both Tiers will
include a $25,000 non-refundable application fee. The Exchange also
proposes to charge annual fees of $35,000 and $20,000 for Tiers I and
II, respectively, on a pro-rated basis.
The Exchange proposes to waive the entry fee for any Company that
is listed on another national securities exchange if such Company
transfers its listing to the Exchange, is dually-listed on the Exchange
and another national securities exchange but ceases to maintain its
listing on that other national securities exchange or is listed on
another national securities exchange but not listed on the Exchange, if
the issuer of such securities is acquired by an unlisted company and,
in connection with the acquisition, the unlisted company lists
exclusively on the Exchange. Annual dual listing fees will be $15,000
for both tiers and will be pro-rated.
At this time, the Exchange has not proposed to charge for
ministerial changes implemented by a Company (e.g., name changes and
symbol changes), nor has the Exchange proposed to charge a fee for
necessary work related to corporate actions of a Company (e.g., a
reverse stock split, re-incorporation, etc.).
2. Statutory Basis
Approval of the rule changes proposed in this submission is
consistent with the requirements of the Act and the rules and
regulations thereunder that are applicable to a national securities
exchange, and, in particular, with the requirements of
[[Page 31666]]
Section 6(b) of the Act.\22\ In particular, the proposed change is
consistent with Section 6(b)(5) of the Act,\23\ because it would
promote just and equitable principles of trade, remove impediments to,
and perfect the mechanism of, a free and open market and a national
market system, and, in general, protect investors and the public
interest.
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\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(5).
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The Exchange's proposal comes at a time when there are two dominant
primary listing venues, the New York Stock Exchange and Nasdaq.
Further, there have recently been reports of a potential combination of
these two listing venues under one corporate umbrella. Whether or not
such combination occurs (and particularly if it does), the Exchange
believes that the proposed change would increase competition by
providing an alternative to Nasdaq and the New York Stock Exchange for
a company seeking to list its securities. Accordingly, the Exchange
believes that the proposal will provide companies with another option
for raising capital in the public markets, thereby promoting the
aforementioned principles discussed in Section 6(b)(5) of the Act.\24\
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\24\ 15 U.S.C. 78f(b)(5).
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The Exchange also believes the proposal is consistent with Section
6(b)(9) of the Act,\25\ because Rule 14.3(b)(8) of the proposal would
adopt rules prohibiting the listing of any security issued in a limited
partnership rollup transaction (as defined in Section 14(h) of the
Act), unless such transaction satisfies the criteria of Section 6(b)(9)
and a broker-dealer that is a member of a national securities
association subject to Section 15A(b)(12) of the Act participates in
the rollup transaction.
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\25\ 15 U.S.C. 78f(b)(9).
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Finally, the Exchange believes the proposal is consistent with
Section 6(b)(4) of the Act,\26\ as it provides for the equitable
allocation of reasonable dues, fees and other charges among issuers.
Specifically, as proposed, the Exchange is establishing a clear-cut and
simple pricing structure, that is not variable based on the number of
shares or other metrics. Thus, the proposed fees are equitable in that
they will be the same amongst issuers seeking to list Tier I securities
and the same amongst issuers seeking to list Tier II securities.
Further, the Exchange believes its proposed pricing is reasonable, as
the Exchange has not proposed additional fees that issuers incur at
other exchanges, including fees for issuance of additional shares, name
changes and other corporate actions. Finally, the Exchange notes that
its proposed pricing, while not necessarily cheaper for all issuers at
all other markets, is roughly equivalent or less than issuers would pay
at other exchanges. For instance, issuers listing on the Nasdaq Global
Market pay between $125,000 and $225,000 initially (depending on the
number of shares) and between $35,000 and $99,500 annually, compared to
proposed Tier I fees of $100,000 initially and $35,000 annually.\27\
Similarly, issuers listing on the Nasdaq Capital Market pay either
$50,000 or $75,000 initially (depending on the number of shares) and
between $17,500 and $75,000 annually,\28\ compared to proposed Tier II
fees of $50,000 initially and $20,000 annually. Also, as noted above,
Nasdaq and NYSE charge multiple other fees applicable to additional
shares issued by listed companies, corporate actions and related
activities of issuers, whereas the Exchange's proposed fees do not
include such additional fees.
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\26\ 15 U.S.C. 78f(b)(9) [sic].
\27\ See Nasdaq Rule 5910(a) and (c).
\28\ See Nasdaq Rule 5920(a) and (c).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change imposes
any burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Changes and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposal 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 No. SR-BATS-2011-018 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 No. SR-BATS-2011-018. 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, 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 will also 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 No. SR-BATS-2011-018 and should be
submitted on or before June 22, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-13422 Filed 5-31-11; 8:45 am]
BILLING CODE 8011-01-P