[Federal Register Volume 79, Number 167 (Thursday, August 28, 2014)]
[Notices]
[Pages 51383-51385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20465]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72899; File No. SR-NASDAQ-2014-067]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Granting Approval of Proposed Rule Change To Rule 5305 To Eliminate the
Automatic Transfer of Companies From The NASDAQ Global Market to The
NASDAQ Global Select Market
August 22, 2014.
I. Introduction
On June 25, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend its rules in order to eliminate the
Exchange's automatic annual review and transfer of qualified companies
from The NASDAQ Global Market to The NASDAQ Global Select Market. The
proposed rule change was published for comment in the Federal Register
on July 10, 2014.\3\ The Commission received no comment letters
regarding the proposed rule change. This order approves the proposed
rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 72538 (July 3,
2014), 79 FR 39446 (``Notice'').
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II. Description of the Proposal
NASDAQ consists of three listing tiers: The NASDAQ Global Select
Market (``Global Select'' or ``Global Select Market''), The NASDAQ
Global Market (``Global Market''), and The NASDAQ Capital Market
(``Capital
[[Page 51384]]
Market''). Each tier has different listing requirements; Capital Market
has the lowest quantitative criteria to qualify for listing and Global
Select has the highest quantitative criteria to qualify for listing. In
its filing NASDAQ states that the tiers were designed to appeal to
companies with different characteristics.\4\ Currently, pursuant to
NASDAQ Rule 5305(b), NASDAQ conducts an annual review of all Global
Market-listed companies' qualifications each year in November and
December based on data as of October 31, and automatically places
qualified Global Market companies in the Global Select tier the
following January.\5\ While this annual review currently occurs
automatically, a Global Market-listed company also may apply to list on
the Global Select tier at any time.\6\ Companies transferring from the
Global Market to the Global Select Market, whether as part of the
annual review process or upon their own application, are not assessed
entry or application fees.\7\
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\4\ See Notice, 79 FR at 39446.
\5\ Id.
\6\ Id.
\7\ Id.
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The Exchange has proposed to eliminate NASDAQ's automatic annual
review and transfer of qualified companies to the Global Select Market.
Under the proposal, NASDAQ would review Global Market-listed companies
for transfer to the Global Select Market only upon application by the
company. To effect this change, the Exchange has proposed to delete the
text of Rule 5305(b). According to the Exchange, the reasons for the
implementation of the automatic annual review and transfer process in
2006, when the Global Select tier was created, are less relevant today,
and eliminating this process would remove an unnecessary burden on
NASDAQ staff.\8\ NASDAQ proposes to implement this change upon
approval, and states that it will notify Global Market-listed companies
about this change via an email communication.\9\
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\8\ Id. at 39446-47. NASDAQ notes that 228 securities
transferred to the Global Select Market in January 2011 based on
NASDAQ's automatic review, and between 58 and 77 securities
transferred in each subsequent year. Id. at 39446 n.5.
\9\ Id. at 39446.
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As a result of the proposed rule change, companies automatically
transferred in January 2014 would be the last group automatically
transferred upon NASDAQ's review under Rule 5305(b). A Global Market-
listed company could continue to apply for transfer to the Global
Select tier at any point during the year by submitting a listing
application, and the review of an application would continue to be
conducted without cost to the issuer.\10\ Qualified companies that
apply could transfer immediately upon confirmation by NASDAQ staff that
the company meets the Global Select Market listing requirements, and
would not owe any entry or other fees in connection with a transfer
from the Global Market to the Global Select tier.\11\
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\10\ Id.
\11\ Id. at 39446-47. The Commission also notes that annual fees
for continued listing are the same for the Global Market and Global
Select tiers.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\12\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\13\ which
requires, among other things, that the rules of a national securities
exchange be 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; and are not designed to permit unfair discrimination
between customers, issuers, brokers or dealers.
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\12\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\13\ 15 U.S.C. 78f(b)(5).
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As a result of the proposed rule change, Global Market-listed
companies will have to monitor whether they qualify for transfer to the
Global Select Market and submit an application for listing on the
Global Select Market, rather than rely on the Exchange's automatic
review and transfer process. The Commission observes that this could
create an additional burden for Global Market-listed issuers that would
otherwise rely on the Exchange's automatic process for transfer to the
Global Select tier. The Exchange acknowledges this burden, but believes
that, on balance, it is not significant enough to warrant continuing
the automatic transfer process, which places a burden on NASDAQ staff
that the Exchange believes is unnecessary.\14\ The Exchange notes that
much of the information required for the application is pre-populated
for a company, and asserts that, given the ease of the application
process, it would continue to be simple for qualified companies to
request review at any time and without cost.\15\
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\14\ See Notice, 79 FR at 39446-47.
\15\ Id. at 39446. The Exchange states that the application to
transfer from the Global Market to the Global Select Market is
available on its Web site, completed online and pre-populated with
the company's identifying information based on its symbol and CIK
code or CUSIP number. The listed company generally will only need to
provide contact information, affirm the accuracy of the information
in the application, and accept the Listing Agreement. Id. at n. 6.
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Balancing the apparent simplicity of the application process and
the fact that Global Market-listed companies may apply for a transfer
to the Global Select tier at any time and with no charge from NASDAQ
against the unnecessary burden that NASDAQ asserts is placed on its
staff by the automatic review and transfer process, the Commission
believes that the proposed rule change is reasonable and consistent
with Section 6(b)(5) of the Act in that it promotes just and equitable
principles of trade, protects investors and the public interest, and is
not designed to permit unfair discrimination between issuers. Under the
proposal, a Global Market-listed company that is unsure of its status
could continue to submit an application and request review of its
qualifications at any time during the year through what appears to be a
relatively simple application process, and with no charge or additional
fees imposed by NASDAQ.\16\ While the Commission expects that companies
would monitor their listing qualifications, even a company that
performs little or no such monitoring could obtain a review of its
qualifications from NASDAQ at any time and potentially transfer to the
Global Select tier with apparent ease.
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\16\ See supra note 11.
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As noted above, the automatic review process was developed at the
inception of the Global Select tier to notify companies about their
eligibility for that tier, which was, at that time, new and unfamiliar
to them. As a result, the Commission notes that the automatic review
process provided a mechanism for NASDAQ to promote, market, and expand
the new Global Select tier to eligible companies. Now that companies
are familiar with this process and also have an easy way to apply
throughout the year, the Commission believes that it is consistent with
the Act, and Section 6(b)(5) in particular, for NASDAQ no longer to
offer this service to promote its Global Select tier. In addition, the
Commission notes that it received no comments on the proposal, and thus
is not aware of any objection to it from
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interested parties, in particular, Global Market-listed companies.
Moreover, eliminating the automatic review process, which NASDAQ has
stated is a burden on its staff, could free up additional resources
that may be better used for the regulation and oversight of listed
companies.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\17\ that the proposed rule change (SR-NASDAQ-2014-067) be, and it
hereby is, approved.
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\17\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20465 Filed 8-27-14; 8:45 am]
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