[Federal Register Volume 79, Number 111 (Tuesday, June 10, 2014)]
[Notices]
[Pages 33239-33241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-13455]
[[Page 33239]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72311; File No. SR-NASDAQ-2014-058]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change to Amend IM-5900-7 to, Among
Other Things, Modify the Free Services Offered to Certain Newly Listing
Companies
June 4, 2014.
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 May 27, 2014, The NASDAQ Stock Market LLC (``Nasdaq'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by Nasdaq. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
Nasdaq proposes to amend IM-5900-7 to modify the services offered
to certain newly listing companies. Nasdaq will implement the proposed
rule upon approval. However, any company that applies to list on Nasdaq
before July 31, 2014, and lists before September 30, 2014, may elect to
instead receive services under the terms of the rule as in effect
before this amendment.\3\
---------------------------------------------------------------------------
\3\ Nasdaq will maintain, in its online rule book, a link to the
text of the rule as in effect before this amendment.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaq.cchwallstreet.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, 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
In December 2011, Nasdaq adopted a rule to provide complimentary
services to companies listing on the Nasdaq Global and Global Select
Markets in connection with an initial public offering, upon emerging
from bankruptcy, or in connection with a spin-off or carve-out from
another company (``Eligible New Listings'') and to companies that
switch their listing from the New York Stock Exchange to the Nasdaq
Global or Global Select Markets (``Eligible Switches'').\4\ Under this
rule, Eligible Switches with a market capitalization of $500 million or
more receive complimentary services for four years from the date of
their listing. All other Eligible Switches and Eligible New Listings
receive complimentary services for two years from the date of their
listing. In addition, Eligible Switches and Eligible New Listings with
a market capitalization of $500 million or more receive additional
services that companies with a market capitalization below $500 million
do not receive (the ``Additional Services'').\5\
---------------------------------------------------------------------------
\4\ Exchange Act Release No. 65963 (December 15, 2011), 76 FR
79262 (December 21, 2011) (SR-NASDAQ-2011-122, approving the
adoption of IM-5900-7) (the ``Prior Filing'').
\5\ The Additional Services include extra licenses for Directors
Desk, additional press release distribution services and market
surveillance tools.
---------------------------------------------------------------------------
Based on Nasdaq's experience with the program, Nasdaq now proposes
to modify certain aspects of the program. First, Nasdaq proposes to
increase the threshold for an Eligible Switch or Eligible New Listing
to receive Additional Services from $500 million to $750 million or
more in market capitalization. Nasdaq believes that this higher
threshold better reflects the level where a company will most benefit
from the Additional Services, and will most likely continue to purchase
those services after the complimentary period has expired. In addition,
Nasdaq believes that the higher threshold will better reflect the type
of companies that, when listing on Nasdaq, will assist in Nasdaq's
efforts to attract and retain other listings. Nasdaq also proposes to
provide three years of services, instead of four, to Eligible Switches
with a market capitalization of $750 million or more.
Next, based on customer usage and demand for services, Nasdaq
proposes to remove Directors Desk, an online board portal, from the
program and instead offer companies four interactive webcasts, which
can be used in connection with a company's quarterly earnings call. A
number of companies have expressed interest in interactive webcasts
during their discussions with Nasdaq and many purchase this service
from NASDAQ OMX Corporate Solutions. Furthermore, Nasdaq has observed
that companies offered the complimentary Directors Desk package may
decline to use it, or may only use a few of the available seats. As
such, Nasdaq believes that while the interactive webcasts may cost less
than Directors Desk, the expected increase in utilization by companies
could make this substitution more valuable to companies. Nasdaq also
proposes to change its offer for market analytic tools from four users
to two users. First, the price stated for four users is significantly
below the current retail price of that offering, and companies could
not renew the service for four users at that stated price. Nasdaq also
has observed that many companies contracted for four users of the
market analytic tools just because they were available, and not because
they were actually needed by the company, and these companies may not
be interested in continuing to pay for those users at the retail price
when the package expires.
Nasdaq also proposes to update the retail values for individual
components and the total package in the rule text. These prices have
changed since the original adoption of the rule based on enhancements
to the services and as a result of the competitive environment in which
NASDAQ OMX Corporate Solutions operates.
The cumulative effect of these changes would reduce the stated
annual value of the package from approximately $94,000 to approximately
$70,000 for companies with a market capitalization of up to $750
million and from approximately $169,000 to approximately $125,000 for
companies with a market capitalization of $750 million or more.\6\ The
stated annual value of the package available to Eligible New Listings
and Eligible Switches with a market capitalization between $500 million
and $750 million would change from approximately $169,000 to
approximately $70,000.
---------------------------------------------------------------------------
\6\ The prior value for each package is the amount currently
reflected in the rule text. The value of the proposed package is
based on retail prices as of May 2014.
---------------------------------------------------------------------------
Finally, since adopting this program, companies have needed time
after the listing date to complete the contracting process and training
for the service, and therefore were unable to start using
[[Page 33240]]
them until after their listing date. To address these situations,
Nasdaq proposes to remove the language in IM-5900-7 that now states the
complimentary period starts from the date of listing and add new
paragraph (d) to describe the start of the complimentary period. Under
the proposed rule, the complimentary period generally will begin on the
listing date. However, if a company first uses a service within 30 days
after the listing date, Nasdaq will use the date the company first uses
that particular service as the start of the complimentary period, in
order to help insure that eligible companies receive the full intended
benefit.\7\ If the company does not actually start using a service
within 30 days of its listing, the starting date of the period during
which the complimentary services could be used would begin on the date
of listing.\8\
---------------------------------------------------------------------------
\7\ The Commission notes that the proposed rule states that ``if
an Eligible New Listing or Eligible Switch begins to use a
particular service provided under [IM-5900-7] within 30 days after
the date of listing, the complimentary period for that service will
begin on the date of first use'' and ``in all other cases, the
period for each complimentary service shall commence on the listing
date.'' See proposed IM-5900-07(d).
\8\ The proposed rule change would also modify the rule to
consistently call the elements of the offering ``services'' instead
of interchangeably using ``products'' and ``services''.
---------------------------------------------------------------------------
Nasdaq will implement the proposed rule upon approval. However,
companies near a listing or switch may have relied upon the services
described in the current rule in making their decision. As such, Nasdaq
will allow any company that applies before July 31, 2014, and lists
before September 30, 2014, to elect to receive services under the terms
of the rule as in effect before this amendment.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\9\ in general, and Sections
6(b)(4), 6(b)(5), and 6(b)(8), in particular, in that the proposal is
designed, among other things, to provide for the equitable allocation
of reasonable dues, fees, and other charges among Exchange members and
issuers and other persons using its facilities and to promote just and
equitable principles of trade, and is not designed to permit unfair
discrimination between issuers, and that the rules of the Exchange do
not impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. In the Prior Filing, the
Commission determined that existing IM-5900-7 is consistent with these
provisions of the Act.\10\ The proposed rule change, which modifies the
packages available to companies and provides some additional
flexibility for companies to choose the starting date for the
complimentary services available under IM-5900-7, does not change that
conclusion.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f.
\10\ Exchange Act Release No. 65963, 76 FR at 79267.
---------------------------------------------------------------------------
Nasdaq faces competition in the market for listing services,\11\
and it competes, in part, by offering valuable services to companies,
including services that ease the companies' transition to being public
or listed on a new exchange. Nasdaq believes that the changes to the
package, including the proposed substitution of webcasts for board
portal tools, and the increased flexibility surrounding the start date
of services will result in a more enticing package for potential new
listings, even though the individual value of the services offered may
be less, and therefore will enhance competition among listing
exchanges. Nasdaq also does not believe that any of these changes
impose an additional burden not necessary or appropriate in furtherance
of the purposes of the Act on the competition between NASDAQ OMX
Corporate Solutions and other service providers.
---------------------------------------------------------------------------
\11\ The Justice Department has noted the intense competitive
environment for exchange listings. See ``NASDAQ OMX Group Inc. and
IntercontinentalExchange Inc. Abandon Their Proposed Acquisition Of
NYSE Euronext After Justice Department Threatens Lawsuit'' (May 16,
2011), available at http://www.justice.gov/atr/public/press_releases/2011/271214.htm.
---------------------------------------------------------------------------
The change to the services in the packages is not designed to
permit unfair discrimination. All listed companies receive services
from Nasdaq, including Nasdaq Online and the Market Intelligence Desk
and Nasdaq has justified why providing services to Eligible New
Listings and Eligible Switches is not unfairly discriminatory in the
Prior Filing. The proposed rule change would slightly reduce the value
of the additional services provided to larger Eligible New Listings and
Eligible Switches and therefore would reduce any discrimination between
larger and smaller companies.
Nasdaq also believes that the proposed change to allow Additional
Services to Eligible New Listings and Eligible Switches with a market
capitalization of $750 million or more, instead of $500 million or
more, is not designed to permit unfair discrimination between issuers.
In the Prior Filing, Nasdaq noted that it offers more services to
larger companies because they need more and different governance,
communication and intelligence services and because attracting these
larger companies will likely bring greater future value to Nasdaq. The
proposed change from $500 million to $750 million reflects Nasdaq's
conclusion, based on its experience with the program, that this higher
threshold is appropriate to differentiate the companies that will most
benefit from the Additional Services and provide the most future value
to Nasdaq. As such, Nasdaq does not believe that this change unfairly
discriminates between issuers. In addition, the proposed change to
reduce the free services available to larger Eligible Switches from
four years to three years reduces an existing difference between
Eligible Switches and other Eligible New Listings, and therefore also
does not unfairly discriminate between issuers.
Allowing companies up to 30 days after their listing to start using
the services is a reflection of Nasdaq's experience that it can take
companies a period of time to review and complete necessary contracts
and training for services following their listing. Allowing this modest
30 day period, if the company needs it, helps ensure that the company
will have the benefit of the full period permitted under the rule to
actually use the services, thereby enabling companies to receive the
full intended benefit. This change also more closely aligns Nasdaq's
treatment of these companies with other customers of NASDAQ OMX
Corporate Solutions, who do not receive or pay for services until they
are contracted. As such, the proposed change does not permit unfair
discrimination or impose a burden on competition.
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. As described in the
statutory basis section, above, the proposed rule change responds to
competitive pressures in the market for listings. Nasdaq believes that
the changes to the package and the increased flexibility surrounding
the start date of services will result in a more enticing package for
potential new listings, even though the individual value of the
services offered may be less, and therefore will enhance competition
among listing exchanges.
In addition, the proposed rule change will result in fewer
companies receiving the Additional Services and shorten the
[[Page 33241]]
period for which some companies receive services, which may have the
result of enhancing competition with other listing venues and with
other service providers.
Nasdaq does not believe that allowing companies up to an additional
30 days to begin their complimentary period will cause any burden on
competition. This change would only confer a short period prior to
using services for companies that have already determined where to list
and which services to use. In fact, a competing service provider could
continue to offer its services during that 30 day period, which would
enhance competition among service providers.
Accordingly, Nasdaq does not believe the proposed rule change will
impose 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
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 self-regulatory organization 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 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-2014-058 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-2014-058. 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 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-2014-058 and should
be submitted on or before July 1, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13455 Filed 6-9-14; 8:45 am]
BILLING CODE 8011-01-P