[Federal Register Volume 79, Number 227 (Tuesday, November 25, 2014)]
[Notices]
[Pages 70232-70237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-27879]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73647; File No. SR-NASDAQ-2014-087]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt an All-Inclusive Annual Listing Fee and Modify Certain Other
Listing Fees
November 19, 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 November 7, 2014, 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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt an all-inclusive annual listing fee
and modify certain other listing fees. While these amendments are
effective upon filing, the Exchange has designated the proposed
amendments to be operative on January 1, 2015.
The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com, at NASDAQ's principal office, 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq proposes to adopt an all-inclusive annual listing fee, which
will simplify billing and provide transparency and certainty to
companies as to the annual cost of listing, modify annual fees for
listed companies that remain on the existing fee schedule, and clarify
certain fee rules.
Nasdaq understands from speaking with listed companies that many
companies object to the number and in some cases the variable nature of
certain of Nasdaq's listing fees. For example, a company may owe fees
when it issues additional shares as a result of events that do not
raise money and cannot always be forecasted or budgeted for by the
company, such as the exercise by employees of stock options or the
implementation of a reverse stock split. To address such concerns,
Nasdaq has determined to create an alternative fee schedule, which
eliminates fees related to the issuance of additional shares, record-
keeping changes, and substitution listing events, thereby simplifying
and clarifying for companies the annual fees to which they are subject.
In addition, under this alternative fee structure, Nasdaq will also
eliminate the fee for a written interpretation of the listing rules and
for review by Nasdaq Staff of a compliance plan. As a result, companies
subject to this alternative structure will pay only a single annual fee
to Nasdaq, which will include all the ordinary costs of listing for the
year.\3\ This change will also benefit Nasdaq, by eliminating the
multiple invoices that must be sent to a company each year \4\ and
providing more certainty as to revenue.
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\3\ A company that receives a delisting determination or public
reprimand letter must still pay fees for review of that decision by
an independent Hearings Panel or the Nasdaq Listing and Hearing
Review Council. Companies also will pay application and entry fees
to list new classes of securities.
\4\ In addition to the annual fee, companies are also billed
quarterly for listing of additional shares fees and upon the
occurrence of events that result in record keeping and substitution
listing fees.
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As detailed in the charts below, for companies listed on the
Capital Market, other than ADRs and Closed-end Funds, the all-inclusive
annual fee will range from $42,000 to $75,000; for ADRs listed on the
Capital Market the all-inclusive annual fee will range from $37,000 to
$45,000. On the Global and Global Select Markets, the all-inclusive
annual fee for companies other than ADRs and Closed-end Funds will
range from $45,000 to $155,000 and the all-inclusive annual fee for
ADRs will range from $45,000 to $75,000. The all-inclusive annual fee
for Closed-end Funds listed on any market tier will range from $30,000
to $100,000. In each case, a company's all-inclusive annual fee will be
based on its total shares outstanding.\5\
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\5\ In establishing the fee changes described in this rule
filing, including the changes to the number and cut-off point of
pricing tiers, Nasdaq considered various factors that distinguish
companies, including market tier, shares outstanding, and security
type, as well as the perceived use of various Nasdaq regulatory and
support services by companies of various characteristics. Pricing
for similar securities on other national securities exchanges was
also considered. Based on this analysis, Nasdaq proposes to modify
the number of fee tiers within the annual fee schedule to better
align fees with the size of the companies that pay those fees and
the use Nasdaq believes that companies of various sizes typically
make of Nasdaq's services. In setting the all-inclusive annual fee,
Nasdaq reviewed the billing history of more than 1,800 companies
that had been listed on Nasdaq for at least four years to determine
the fees assessed these companies for all listing-related services,
including those assessed for listing of additional shares, record-
keeping changes, substitution listing events, rule interpretations,
and compliance plan reviews. Nasdaq established the all-inclusive
annual fee for each security type and shares outstanding tier based
on this analysis of historical fees paid and regulatory services
used, taking into account the changes also proposed to the annual
fee schedule.
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While this alternative is being introduced in response to feedback
from Nasdaq's listed-companies, Nasdaq also understands that this
innovation may not be appealing to all companies and therefore proposes
to allow currently listed companies the option to switch to the
proposed all-inclusive annual fee schedule for 2015 or to wait until
2018, when it will become mandatory for all companies. However, Nasdaq
will offer incentives to companies that voluntarily elect the all-
inclusive annual fee schedule for 2015.\6\ Specifically, any company
that chooses to be subject to
[[Page 70233]]
the all-inclusive annual fee beginning in 2015 will be billed for 2015,
2016 and 2017 based on the lower of its then-current total shares
outstanding or the total shares outstanding reflected in information
held by Nasdaq as of December 31, 2014. As such, regardless of any
increase in the company's shares outstanding during that time, the tier
upon which its all-inclusive annual fee is based will not increase
until at least January 1, 2018. In addition, because listing of
additional shares fees are billed based on a company's public filings,
share changes in the last reporting period of 2014 could be billed
after the company has opted in and, in many cases, not until 2015. In
order to eliminate confusion by companies that elect to pay the all-
inclusive annual fee, and therefore believe they should not receive any
further listing of additional shares fee bills, Nasdaq proposes to
forgive these listing of additional shares fees. Specifically, a
company that elects to be subject to the all-inclusive annual fee will
not be billed for listing of additional shares after it notifies Nasdaq
of its election by filing the required form. As such, fees for shares
issued in the final period of 2014, which otherwise could be billed
during 2015, will be forgiven. Nasdaq does not believe that these
incentives will have any adverse impact on the amount of funds
available for its regulatory programs.
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\6\ Companies may make this election on the NASDAQ OMX Listing
Center Web site. A copy of the electronic form that will be used for
this purpose is attached to the rule filing as Exhibit 3.
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All companies that list after January 1, 2015 will be subject to
the proposed all-inclusive annual fee. However, Nasdaq acknowledges
that companies that have already applied to list, or apply in the near
term, may have made their listing decision based on Nasdaq's current
fee schedule. As such, Nasdaq proposes to make the following
accommodation for any company that applied to list on Nasdaq prior to
January 1, 2015, and lists after that date. Until December 31, 2017,
such an applicant will be billed the all-inclusive annual fee based on
the lower of its then-current total shares outstanding or the total
shares outstanding reflected in information held by Nasdaq as of the
date of listing. As such, regardless of any increase in shares
outstanding, the tier upon which the all-inclusive annual fee is based
for such companies will not increase until at least January 1, 2018.
The proposed rule change also raises the annual fees that will be
paid by listed companies that remain on the existing fee schedule. The
annual fee paid by most Capital Market companies last increased
effective January 1, 2013.\7\ Fees have not been increased on Global
Market companies since January 1, 2010.\8\ Since then, Nasdaq has
invested in upgrades to the NASDAQ MarketSite, which houses a state-of-
the-art digital broadcast studio and can be utilized as a New York
venue by listed companies, and the MarketSite Tower. In addition,
Nasdaq has invested in its online tools, including the Listing Center
and Reference Library. The Listing Center allows companies to submit
their notifications to Nasdaq electronically, using on-line forms that
are pre-populated with much of the required information. The Reference
Library contains more than 400 frequently asked questions describing
the application of the listing rules, and summaries of approximately
450 interpretive letters and decisions of the Nasdaq Listing and
Hearing Review Council. These tools, which provide transparency to the
application of the listing rules and simplify some burdens of being a
listed company, have had approximately 440,000 page views from January
1 to July 31, 2014. Nasdaq believes it is appropriate to modify its
fees to allow continued investment in these initiatives and other
innovative ideas that benefit listed companies and enhance the
effectiveness of Nasdaq's regulatory program.\9\
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\7\ Securities Exchange Act Release No. 68129 (November 1,
2012), 77 FR 66907 (November 7, 2012) (approving SR-NASDAQ-2012-
120).
\8\ Securities Exchange Act Release No. 61669 (March 5, 2010),
75 FR 11958 (March 12, 2010) (approving SR-NASDAQ-2009-081).
\9\ The proposed all-inclusive annual fee described above was
based off of the proposed increased annual fees and also reflects
Nasdaq's investment in these initiatives and enhancements.
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The revised annual fees for most companies listed on the Capital
Market will range from $32,000 to $45,000 based on total shares
outstanding, compared with the current $32,000. The revised annual fees
for most companies listed on the Global or Global Select Markets will
range from $40,000 to $125,000 based on total shares outstanding,
compared with the current range of $35,000 to $99,500.
The following charts summarize the current annual fee, the proposed
annual fee and the proposed all-inclusive annual fee applicable to
domestic and foreign companies, ADRs, and Closed-end Funds.
The revised fees for domestic and foreign companies, other than
ADRs and Closed-end Funds, are as follows:
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2015 all-
Total shares outstanding 2014 annual 2015 annual inclusive fee
fee * fee * **
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Global/Global Select Markets
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Up to 10 million shares......................................... $35,000 $40,000 $45,000
10+ to 50 million shares........................................ 37,500 40,000 55,000
50+ to 75 million shares........................................ 46,500 46,500 75,000
75+ to 100 million shares....................................... 68,500 69,000 100,000
100+ to 125 million shares...................................... 89,000 93,000 125,000
125+ to 150 million shares...................................... 89,000 125,000 135,000
[[Page 70234]]
Over 150 million shares......................................... 99,500 125,000 155,000
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Capital Market
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Up to 10 million shares......................................... $32,000 $32,000 $42,000
10+ to 50 million shares........................................ 32,000 40,000 55,000
Over 50 million shares.......................................... 32,000 45,000 75,000
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The revised fees for ADRs and Closed-end Funds are as follows:
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NASDAQ Global/Global Select Market NASDAQ Capital Market
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Total ADRs outstanding 2015 all- 2015 all-
2014 annual 2015 annual inclusive fee 2014 annual 2015 annual inclusive fee
fee * fee * ** fee * fee * **
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ADRs
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Up to 10 million ADRs................................... $30,000 $40,000 $45,000 $32,000 $32,000 $37,000
10+ to 50 million ADRs.................................. 37,500 40,000 45,000 32,000 40,000 45,000
50+ to 75 million ADRs.................................. 42,500 46,500 52,500 32,000 40,000 45,000
Over 75 million ADRs.................................... 50,000 69,000 75,000 32,000 40,000 45,000
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NASDAQ Global/Global Select and Capital
Markets
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Total shares outstanding 2015 all-
2014 annual 2015 annual inclusive fee
fee * fee * **
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Closed-end Funds
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Up to 5 million shares.......................................... $15,000 $22,500 $30,000
5 to 10 million shares.......................................... 17,500 22,500 30,000
10 to 25 million shares......................................... 20,000 22,500 30,000
25 to 50 million shares......................................... 22,500 22,500 30,000
50+ to 100 million shares....................................... 30,000 35,000 50,000
100+ to 250 million shares...................................... 50,000 55,000 75,000
Over 250 million shares......................................... 75,000 80,000 100,000
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* Company must also pay listing of additional shares, record-keeping, substitution listing, and certain
regulatory fees.
** Company does not pay any additional listing of additional shares, record-keeping, substitution listing, or
certain regulatory fees in connection with its continued listing.
Finally, Nasdaq proposes to make certain clarifying changes to the
existing annual fee rule text and incorporate these same concepts in
the proposed all-inclusive fee. First, Nasdaq proposes to clarify how
annual fees (including the proposed all-inclusive annual fees) are
assessed when a company first lists or transfers between market tiers.
Specifically, Nasdaq proposes to codify its practice of pro-rating
annual fees based on the month of a company's listing, and provide
examples to demonstrate how this proration is applied. Nasdaq's rules
already provide that annual fees previously paid are not refundable if
a company's securities are removed from Nasdaq. Nasdaq proposes to
continue to apply this provision to the proposed all-inclusive fee and
to also clarify under both the annual fee and the all-inclusive fee
that if a company is removed before it has paid the applicable fee, the
fee is nonetheless owed and that Nasdaq will not waive the amount
owed.\10\ In recognition of the fact that a company does not get a
refund or waiver of annual fees or all-inclusive annual fees if its
securities are delisted, Nasdaq also proposes to clarify that if a
company relists in the same year where it had previously paid an annual
fee, that the company would not be subject to a second annual fee for
that same year.
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\10\ This situation would most commonly arise when the Company
delists early in the year before it has paid its annual fee invoice.
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In the case of a company that transfers between Nasdaq's tiers, the
proposed rule change would clarify that the annual fee or all-inclusive
annual fee, as applicable, would be prorated based on the month of the
company's transfer. However, no amount of the annual fee previously
assessed or paid would be refunded if the prorated fee for the new
market tier is lower.
The proposed rule would also modify the way a company is charged if
it has securities listed on both the Global or Global Select Market and
the Capital Market under both the standard annual fee and the all-
inclusive annual fee. Presently, while Nasdaq's rules provide that
Nasdaq will aggregate shares of all securities listed on the Global
Market (including the Global Select Market) in calculating the fee for
the Global Market and shares of all securities listed on the Capital
Market in calculating the fee for the Capital Market, the rules do not
address the situation where the same company has a security listed on
each the Global or Global Select Market and the Capital Market. As a
result, a company presently is charged separately for the securities on
each market tier. Nasdaq believes that this is an inequitable result,
and proposes to modify the rules such that in this situation shares
listed on the Capital Market are not assessed a separate fee for the
Capital Market, but instead are aggregated with the shares listed on
the Global or Global Select Market in calculating the fee for that
market.\11\
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\11\ This situation currently affects fewer than five companies,
which have their common stock listed on the Global or Global Select
Market and a secondary class listed on the Capital Market. Each of
these companies would pay less under the proposed rule change than
they would if Nasdaq continued to assess fees separately for each
market tier.
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[[Page 70235]]
Nasdaq proposes to clarify that where Nasdaq rules waive fees in
connection with certain merger situations, the company will receive a
credit for the amount waived if the acquired company has already paid
that fee. Conversely, in cases where the acquired company has not paid
the fee, the forgiven fee will be treated as a waiver. The proposed
rule will also extend those fee waivers and credits to companies paying
the all-inclusive annual fee. In addition, the proposed rule change
will specify which of the entities involved in a merger will receive
the waiver or credit. Further, while the rule currently requires that a
company apply for a fee waiver if it is applicable, Nasdaq proposes
instead to apply these waivers and credits automatically for all
eligible companies.
Nasdaq also proposes to delete current IM-5920-1, which provides a
waiver for listed securities exempt from registration under Section
12(g) of the Act pursuant to Rule 12g3-2(b). After Nasdaq registered as
a national securities exchange, these securities were initially
permitted to list pursuant to an exemption from Section 12(a) of the
Act.\12\ This exemption expired on August 1, 2009, and companies
described in the interpretive material can no longer be listed on
Nasdaq.
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\12\ Securities Exchange Act Release No. 54241 (July 31, 2006),
71 FR 45359 (August 8, 2006).
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The proposed rule change will also modify the fee accommodation
available to companies that list upon emerging from bankruptcy to
reflect the addition of the all-inclusive annual fee alternative. Under
that rule, the annual fee for a company that lists upon emerging from
bankruptcy is the minimum annual fee for the year of listing and the
subsequent two full calendar years (the ``Bankruptcy Annual Fee
Accommodation''). As revised, such a company can opt to transition to
the all-inclusive annual fee for 2015, just like any other company.
And, consistent with the current rule, a company that does so will pay
the minimum all-inclusive annual fee until the end of its second full
calendar year following listing. In this manner, irrespective of when
the company listed, it will receive the benefit of the Bankruptcy
Annual Fee Accommodation. Moreover, the company will receive the
benefits of proposed IM-5910-1(b)(1) for the period after the
Bankruptcy Annual Fee Accommodation ends until December 31, 2017.\13\
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\13\ If the company initially listed in 2014, it would pay the
minimum $45,000 all-inclusive annual fee for 2015 and 2016 and be
subject to the all-inclusive annual fee in 2017 based on its total
shares outstanding as of December 31, 2014. Alternatively, if the
company initially listed in 2013, it would pay the minimum $45,000
all-inclusive annual fee for 2015 and be subject to the all-
inclusive annual fee in 2016 and 2017 based on its total shares
outstanding as of December 31, 2014. Fewer than 10 companies have
listed on Nasdaq upon emerging from bankruptcy in 2013 or 2014.
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Last, Nasdaq proposes to modify a cross reference to the record-
keeping fee in Rule 5250(e)(3), since that fee will not be payable by
all companies, update the preamble to the listing fee section to
reflect the changes discussed herein and remove from the rules certain
effective dates that are no longer applicable.
While the changes proposed herein are effective upon filing, Nasdaq
has designated that the changes be operative on January 1, 2015. Until
January 1, 2015, Nasdaq will maintain the existing, applicable fee
schedule in its online manual, and will also display the changes
proposed herein as being effective in the future.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\14\ in general and with
Sections 6(b)(4) and (5) of the Act,\15\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees, and
other charges among its members, issuers and other persons using its
facilities, and does not unfairly discriminate between customers,
issuers, brokers or dealers.
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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(4) and (5).
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As a preliminary matter, Nasdaq competes for listings with other
national securities exchanges and companies can easily choose to list
on, or transfer to, those alternative venues.\16\ As a result, the fees
Nasdaq can charge listed companies are constrained by the fees charged
by its competitors and Nasdaq cannot charge prices in a manner that
would be unreasonable, inequitable or unfairly discriminatory.
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\16\ The Justice Department 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.
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Nasdaq believes that the proposed all-inclusive annual fees are
reasonable because Nasdaq is eliminating multiple fees in favor of a
single annual fee for listed companies. Under the proposed fee
structure, companies can pay less than they would if they remain on the
existing structure and pay annual fees, listing of additional shares
fees (which can be as much as $65,000 annually) or incur record-keeping
or substitution listing fees. The proposed all-inclusive annual fees
are also equitably allocated and not unfairly discriminatory because
they will be assessed based on a company's shares outstanding,
consistent with the way Nasdaq and other national securities exchanges
charge fees today.\17\ This allocation method, previously approved by
the Commission, is not inequitable or unfairly discriminatory because
companies with fewer shares outstanding tend to be smaller companies,
which may use fewer of the Exchange's services and be more willing to
forgo an exchange listing if it costs more. In addition, while
companies may pay separate fees today for certain corporate actions,
record-keeping events, and share issuances, as well as fees for written
interpretations of listing rules and reviews of compliance plans, it is
not inequitable or unfairly discriminatory to eliminate those fees
because all companies will benefit similarly from that elimination in
years where they otherwise would have had to pay these fees. In that
regard, Nasdaq reviewed the historic activities of companies with
various amounts of shares outstanding to assess the use of listing-
related services, and established the all-inclusive annual fee for each
security type and tier of outstanding shares based on this
analysis.\18\ Further, the expenses associated with maintaining the
infrastructure to process share issuances and corporate actions and
events and to review rule interpretation requests and compliance plans
is part of Nasdaq's overhead, which helps Nasdaq protect investors and
the public interest to the benefit of all listed companies. That
necessary overhead does not vary materially based on the number of
companies that utilize these services, and it is therefore equitable to
spread their costs across all companies. All listed companies also
benefit from the transparency provided when Nasdaq publishes summaries
of its interpretive letters. As such, spreading the costs of such
interpretations across all listed companies represents an equitable
allocation of reasonable fees and is not unfairly discriminatory.
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\17\ See NYSE Listed Company Manual Section 902.03 (charging an
annual fee per share); NYSE MKT Company Guide Section 141 (charging
an annual fee based on tiers of outstanding shares).
\18\ See footnote 5, supra.
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Nasdaq also believes that the proposed incentives offered to
companies that elect the all-inclusive annual listing fee for 2015 are
reasonable and not unfairly
[[Page 70236]]
discriminatory. These incentives are available equally to all companies
and would provide the same benefit to all companies that make the
election. In addition, as noted above, Nasdaq will accrue benefits from
companies electing the all-inclusive annual listing fee structure,
including by eliminating the multiple invoices that are sent to a
company each year and providing more certainty as to revenue, and the
incentives are designed to help Nasdaq capture these benefits sooner,
which is a reasonable and non-discriminatory reason to provide the
incentives to companies.
The proposed increase to the annual fee for companies that do not
elect the all-inclusive fee, which increase is also reflected in the
all-inclusive annual fee, is also an equitable allocation of reasonable
fees and not unfairly discriminatory based on the enhancements Nasdaq
has made since fees were last increased in 2010, for Global and Global
Select Market companies, and 2013, for most Capital Market
companies.\19\ As described above, Nasdaq has invested in upgrades to
the NASDAQ MarketSite and MarketSite Tower, and its online tools,
including the Listing Center and Reference Library, to the benefit of
all listed companies and their investors and prospective investors. The
proposed increase also will help Nasdaq continue to invest in these
initiatives and its regulatory programs.
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\19\ See footnotes 7 and 8, supra.
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Changes to the tier ranges for fees charged issuers that do not
elect the all-inclusive fee, including ADRs and Closed-end Funds, are
not unreasonable nor unfairly discriminatory because these changes were
based on a review of the number and size of companies in the existing
tier ranges, their historic use of listing-related services, and the
fees charged by other markets.
Nasdaq believes that having lower maximum fees for ADRs under the
proposed all-inclusive and standard annual fees is an equitable
allocation of reasonable fees and not unfairly discriminatory because
the U.S. listing is not typically an ADR's primary listing. In
addition, because ADRs are foreign private issuers, which currently pay
a maximum listing of additional shares fee of $7,500, it is appropriate
to charge ADRs a lower all-inclusive annual fee than a domestic
company, which could pay a listing of additional shares fee of up to
$65,000. On the other hand, Nasdaq believes that it is no longer
appropriate to grant a preference for listing of additional shares fees
to foreign private issuers other than ADRs, because Nasdaq is generally
the primary listing for such companies and other exchanges charge
additional listing fees for these companies in the same manner as
domestic companies. As a result, Nasdaq proposes that foreign private
issuers other than ADRs pay the same all-inclusive annual fee as
domestic issuers, even though they are subject to a lower listing of
additional shares fee under the current fee schedule. Nasdaq would
continue to base its fees for these companies only on the shares issued
and outstanding in the United States, however, so to the extent a
foreign private issuer has another listing, it would only pay fees on
those shares that trade on Nasdaq. As a result, Nasdaq believes it is
an equitable allocation of reasonable fees and not unfairly
discriminatory to require foreign private issuers, other than ADRs, pay
all-inclusive fees on the same schedule as domestic companies. In
addition, in light of the historic benefit provided to foreign private
issuers by way of a lower listing of additional shares fee, Nasdaq
believes it is not unreasonable nor unfairly discriminatory to maintain
that benefit until the existing annual fee schedule is completely
phased out in 2018.
Nasdaq also believes that it is appropriate to maintain a separate
fee schedule for Closed-end Funds based on their unique
characteristics. These companies are particularly sensitive to the
expenses they incur, given that they compete for investment dollars
based on return. In addition, they need to issue shares as a primary
means to expand their businesses and raise additional money to invest.
As such, Nasdaq already applies a different annual fee and maximum
quarterly listing of additional shares fee for these companies, and the
proposed rule change maintains a separate, lower fee schedule for them,
which remains an equitable allocation of reasonable fees that is not
unfairly discriminatory. Nasdaq believes that continuing to assess
separate fees for the review of delisting decisions by the Hearings
Panels and the Nasdaq Listing and Hearing Review Council is an
equitable allocation of reasonable fees that is not unfairly
discriminatory. These reviews come only after Nasdaq staff has either
allowed the company the maximum extension permitted under the listing
rules or determined that such an extension is inappropriate. Such
reviews are not an ordinary cost of a company's annual listing and any
benefit from consideration by the Hearings Panel or Listing and Hearing
Review Council is limited to the particular company that requests
review and is not precedential with respect to other companies. As
such, Nasdaq believes it is appropriate to exclude the fees associated
with these activities from the all-inclusive annual fee.
Nasdaq believes that the proposed clarifying changes describing how
fees are assessed when a company first lists or transfers between
Nasdaq's tiers is an equitable allocation of reasonable fees. In
addition, these changes and the addition of examples demonstrating the
application of various rules will clarify Nasdaq's rules, and thereby
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. Nasdaq rules already provide that a company
that is removed or voluntarily delists will not receive a refund of the
listing fee. Clarifying that a company that transfers to the Capital
Market from the Global or Global Select Market receives a credit for
the fee previously assessed, but not a refund, aligns the treatment
within the rules of these companies with that of companies that are
removed or voluntarily delist. Similarly, clarifying that a company
that paid an annual fee or all-inclusive annual fee for the year will
not be subject to a second fee if it delists and relists in the same
year assures that companies do not pay twice for the same services. As
such, in each of these cases the company receives listing services for
the year it paid the annual fee, and the proposed changes are therefore
equitable allocations of reasonable fees.
Prorating fees for new listings based on the month of listing or
transfer assures that companies are not subject to fees before listing
and are not subject to the higher fees of a particular market tier
before they are listed on that tier, subject to the constraints of
Nasdaq's monthly billing cycles. The rules already allocate annual fees
in this manner for companies that transfer between Nasdaq market
tiers.\20\ As such, this method of assessing fees is an equitable
allocation of reasonable fees.
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\20\ Nasdaq Rules 5910(c)(3), 5910(d)(6) and 5920(c)(5).
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Aggregating shares listed on the Global or Global Select Market
with shares listed on the Capital Market when calculating fees provides
an equitable allocation of fees in a manner that is not unfairly
discriminatory because it provides the same benefit to a company with
shares on both market tiers as is available to a company with all of
its shares on the Global or Global Select Market and such a company
does
[[Page 70237]]
not receive any additional benefit from having some of its shares
listed on the Capital Market.
A company that listed upon emerging from bankruptcy currently pays
the minimum annual fee for the year of listing and subsequent two
years. Allowing such companies that opt in to the all-inclusive annual
fee to also pay the minimum fee on that fee schedule during the same
period, and forgiving a portion of the all-inclusive annual fee in
certain merger situations where the annual fee is similarly forgiven,
is not unreasonable or unfairly discriminatory because these proposed
changes extend benefits available to companies under the existing fee
schedule to companies that will be on the all-inclusive fee schedule,
thereby perpetuating features that the Commission has previously
concluded satisfy the statutory requirements. Clarifying when a company
receives a credit, instead of a waiver, and which company involved in a
merger receives that credit or waiver clarifies Nasdaq's rules and is
not unreasonable or unfairly discriminatory because these
clarifications give effect to the intent of the current waivers while
respecting the difference between the two entities involved in a
merger.
Finally, Nasdaq believes that the proposed fees are consistent with
the investor protection objectives of Section 6(b)(5) of the Act \21\
in that they are designed to promote just and equitable principles of
trade, to remove impediments to a free and open market and national
market system, and in general to protect investors and the public
interest. Specifically, the fees are designed, in part, to ensure that
there are adequate resources for Nasdaq's listing compliance program,
which helps to assure that listing standards are properly enforced and
investors are protected.
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\21\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. The market for
listing services is extremely competitive and listed companies may
freely choose alternative venues based on the aggregate fees assessed,
and the value provided by each listing. This rule proposal does not
burden competition with other listing venues, which are similarly free
to set their fees. Further, this proposed rule change would introduce
an all-inclusive annual listing fee, which no other market currently
offers and which may therefore increase competition with other listing
venues. Nasdaq believes that this innovative fee proposal reflects the
existing competition between listing venues and will further enhance
such competition. For these reasons, Nasdaq does not believe that the
proposed rule change will result in any burden on competition for
listings.
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \22\ and paragraph (f) of Rule 19b-4
thereunder.\23\
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\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
\23\ 17 CFR 240.19b-4(f).
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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 necessary or
appropriate in the public interest; for the protection of investors; or
otherwise in furtherance of the purposes of the Act.
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-2014-087 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2014-087. 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-2014-087 and should
be submitted on or before December 16, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27879 Filed 11-24-14; 8:45 am]
BILLING CODE 8011-01-P