[Federal Register Volume 78, Number 192 (Thursday, October 3, 2013)]
[Notices]
[Pages 61408-61411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24156]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70535; File No. SR-NASDAQ-2013-128]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the NASDAQ Listing Standards Related to Compliance Determinations
for Market Value of Listed Securities and Market Value of Publicly-Held
Shares Deficiencies
September 27, 2013.
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 September 26, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, 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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[[Page 61409]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NASDAQ listing standards related
to compliance determinations for Market Value of Listed Securities and
Market Value of Publicly-Held Shares deficiencies. The text of the
proposed rule change is below. Proposed new language is italicized;
proposed deletions are in brackets.
* * * * *
5810. Notification of Deficiency by the Listing Qualifications
Department
When the Listing Qualifications Department determines that a
Company does not meet a listing standard set forth in the Rule 5000
Series, it will immediately notify the Company of the deficiency. As
explained in more detail below, deficiency notifications are of four
types:
(1) Staff Delisting Determinations, which are notifications of
deficiencies that, unless appealed, subject the Company to immediate
suspension and delisting;
(2) notifications of deficiencies for which a Company may submit a
plan of compliance for staff review;
(3) notifications of deficiencies for which a Company is entitled
to an automatic cure or compliance period; and
(4) Public Reprimand Letters.
Notifications of deficiencies that allow for submission of a
compliance plan or an automatic cure or compliance period may result,
after review of the compliance plan or expiration of the cure or
compliance period, in issuance of a Staff Delisting Determination or a
Public Reprimand Letter.
(a)-(b) No change.
(c) Types of Deficiencies and Notifications
The type of deficiency at issue determines whether the Company will
be immediately suspended and delisted, or whether it may submit a
compliance plan for review or is entitled to an automatic cure or
compliance period before a Staff Delisting Determination is issued. In
the case of a deficiency not specified below, Staff will issue the
Company a Staff Delisting Determination or a Public Reprimand Letter.
(1)-(2) No change.
(3) Deficiencies for which the Rules Provide a Specified Cure or
Compliance Period
With respect to deficiencies related to the standards listed in
(A)-(E) below, Staff's notification will inform the Company of the
applicable cure or compliance period provided by these Rules and
discussed below. If the Company does not regain compliance within the
specified cure or compliance period, the Listing Qualifications
Department will immediately issue a Staff Delisting Determination
letter.
(A)-(B) No change.
(C) Market Value of Listed Securities
A failure to meet the continued listing requirements for Market
Value of Listed Securities shall be determined to exist only if the
deficiency continues for a period of 30 consecutive business days. Upon
such failure, the Company shall be notified promptly and shall have a
period of 180 calendar days from such notification to achieve
compliance. Compliance can be achieved by meeting the applicable
standard for a minimum of 10 consecutive business days during the 180
day compliance period, unless Staff exercises its discretion to extend
this 10 day period as discussed in Rule 5810(c)(3)(F).
(D) Market Value of Publicly Held Shares
A failure to meet the continued listing requirement for Market
Value of Publicly Held Shares shall be determined to exist only if the
deficiency continues for a period of 30 consecutive business days. Upon
such failure, the Company shall be notified promptly and shall have a
period of 180 calendar days from such notification to achieve
compliance. Compliance can be achieved by meeting the applicable
standard for a minimum of 10 consecutive business days during the 180
day compliance period, unless Staff exercises its discretion to extend
this 10 day period as discussed in Rule 5810(c)(3)(F).
(E) No change.
(F) Staff Discretion Relating to the [Bid] Price-based Requirements
If a Company fails to meet the Market Value of Listed Securities,
Market Value of Publicly Held Shares, or Bid Price requirements, each
of which is related to the Company's security price and collectively
called the ``Price-based Requirements,'' compliance is generally
achieved by meeting the requirement for a minimum of ten consecutive
business days. However, Staff may, in its discretion, require a Company
to [maintain a bid price of at least $1.00 per share] satisfy the
applicable Price-based Requirement for a period in excess of ten
consecutive business days, but generally no more than 20 consecutive
business days, before determining that the Company has demonstrated an
ability to maintain long-term compliance. In determining whether to
require a Company to meet the [minimum $1.00 bid price standard]
applicable Price-based-requirement beyond ten business days, Staff
[will] may consider all relevant facts and circumstances, including
without limitation[the following four factors]:
(i) the margin of compliance (the amount by which a Company exceeds
the [bid price is above the $1.00 minimum standard] applicable Price-
based Requirement);
(ii) the trading volume (a lack of trading volume may indicate a
lack of bona fide market interest in the security at the posted bid
price);
(iii) the Market Maker montage (the number of Market Makers quoting
at or above $1.00 or the minimum price necessary to satisfy another
Price-based Requirement; and the size of their quotes); and
(iv) the trend of the stock price (is it up or down).
* * * * *
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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposed rule change is to increase
transparency of the fact that NASDAQ Staff (``Staff'') may consider
periods longer than ten days when evaluating whether a company has
regained compliance with the minimum Market Value of Listed Securities
(``MVLS'') and Market Value of Publicly-Held Shares (``MVPHS'')
requirements, while also generally limiting such review to twenty days.
Currently, NASDAQ Rules provide that compliance with the MVLS and MVPHS
requirements ``can be achieved by meeting the applicable standard for a
minimum of 10 consecutive business days.'' (emphasis added). As such,
[[Page 61410]]
while a company cannot regain compliance in a period less than ten
days, the rule does not require Staff to limit its review for
compliance with the MVLS and MVPHS requirements to exactly ten days.
Further, Staff's broad discretionary authority under Rule 5101 supports
Staff's consideration of a longer period when necessary.\3\
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\3\ Rule 5101 provides NASDAQ with broad discretionary authority
over the initial and continued listing of securities, and allows the
application of additional or more stringent criteria for the
continued listing of particular securities based on any event,
condition, or circumstance that exists or occurs, even though the
securities meet all enumerated criteria for initial or continued
listing on NASDAQ.
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By contrast, Rule 5810(c)(3)(F) explicitly describes Staff's
discretion to extend the compliance period for a bid price deficiency
beyond ten days (but generally not more than 20 days) and identifies
factors for Staff to consider in making a decision to do so.\4\ In the
ten years since adopting these factors,\5\ Staff has found them useful
in determining whether to extend the bid price compliance period beyond
ten days and thus typically uses these same factors, and, generally,
the 20 day limit, when evaluating compliance with the MVLS and MVPHS
requirements. The proposed change to Rule 5810(c)(3)(F) would describe
this practice and thereby provide transparency to the manner in which
Staff applies its existing discretion.
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\4\ These factors are: (i) The margin of compliance; (ii) the
trading volume; (iii) the market maker montage; and (iv) the trend
of the stock price.
\5\ Current Rule 5810(c)(3)(F) was originally adopted in 2003 as
Rule 4310(c)(8)(E). Exchange Act Release No. 47181 (January 14,
2003), 68 FR 3074 (January 22, 2003).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \6\ in general, and furthers the objectives of Section
6(b)(5) of the Act \7\ in particular, in that it is designed 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 will add greater transparency to the rule
administration process by permitting issuers to better understand how
NASDAQ evaluates compliance with the MVLS and MVPHS listing rules. At
the same time, it describes NASDAQ Staff discretion to apply a higher
standard in determining which companies are suitable for continued
listing on the exchange, thus protecting investors.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. In this regard, NASDAQ notes
that the competition among exchanges for listings is robust and
vigorous, and the proposed rule change is not intended, nor is it
expected, to reduce or diminish such competition. The rule brings added
transparency to NASDAQ's vigilant enforcement of the Listing Rules,
which already allow NASDAQ Staff to use discretion to apply more
stringent listing standards. However, it does not allow the Staff any
discretion to apply diminished listing standards in order to attract or
retain listing business. The proposed rule change offers NASDAQ no
advantages over its competitors beyond those created by enhancing the
Exchange's regulatory effectiveness.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \8\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\ The proposed rule
change will add greater transparency by clarifying how NASDAQ applies
its existing authority to evaluate compliance with the MVLS and MVPHS
listing rules for periods longer than ten consecutive business days. As
such, given that the proposed change merely describes, and does not
modify, NASDAQ's authority to determine compliance with the MVLS and
MVPHS requirements, it does not significantly affect the protection of
investors or the public interest and does not impose any significant
burden on competition.
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\8\ 15 U.S.C. 78s(b)(3)(a)(ii).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
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 email to [email protected]. Please include
File Number SR-NASDAQ-2013-128 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-2013-128. This
file number should be included on the subject line if email 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
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for
[[Page 61411]]
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-2013-128 and should
be submitted on or before October 24, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24156 Filed 10-2-13; 8:45 am]
BILLING CODE 8011-01-P