Notice2021-14800
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Listing Rule 5910 To Establish Entry and All-Inclusive Annual Listing Fees for Companies Listing Under IM-5101-2 on the Nasdaq Global Market
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Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 13, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 131 (Tuesday, July 13, 2021)</title>
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[Federal Register Volume 86, Number 131 (Tuesday, July 13, 2021)]
[Notices]
[Pages 36807-36810]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-14800]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92345; File No. SR-NASDAQ-2021-055]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend Listing Rule 5910 To Establish Entry and All-Inclusive Annual
Listing Fees for Companies Listing Under IM-5101-2 on the Nasdaq Global
Market
July 7, 2021.
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 June 28, 2021, 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 amend Listing Rule 5910 to establish Entry
and All-Inclusive Annual Listing Fees for companies listing under IM-
5101-2 (companies whose business plan is to complete one or more
acquisitions) on the Nasdaq Global Market.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules</a>, 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 aspects of such
statements.
[[Page 36808]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Historically, companies 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, as
described in IM-5101-2, (``Acquisition Companies'') would choose to
list on the Nasdaq Capital Market instead of the Nasdaq Global Market,
primarily because it has lower fees. However, nothing in Nasdaq's rules
prohibits an Acquisition Company from listing on the Global Market.\3\
More recently, certain Acquisition Companies have sought to list on the
Nasdaq Global Market. In particular, Nasdaq notes that a recent SEC
statement about accounting treatment by Acquisition Companies \4\ has
resulted in some Acquisition Companies adopting different accounting
practices and, as a result, having insufficient equity to qualify for
initial listing on the Nasdaq Capital Market. However, these companies
could list on the Nasdaq Global Market or on competing marketplaces,
which permit listing without any minimum equity requirement.\5\ Nasdaq
wishes to revise the fees for Acquisition Companies listing on the
Nasdaq Global Market so that its fees for these companies seeking to
list on that market tier will be competitive with other markets where
they can list.
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\3\ Nasdaq Listing Rule 5310(i) provides that an Acquisition
Company is not eligible to list on the Nasdaq Global Select Market.
\4\ Staff Statement on Accounting and Reporting Considerations
for Warrants Issued by Special Purpose Acquisition Companies
(SPACs), by John Coates, Acting Director of the Division of
Corporation Finance, and Paul Munter, Acting Chief Accountant (April
12, 2021), available at: <a href="https://www.sec.gov/news/public-statement/accounting-reporting-warrants-issued-spacs">https://www.sec.gov/news/public-statement/accounting-reporting-warrants-issued-spacs</a>.
\5\ Nasdaq Rule 5405(b)(3) allows a company to list on the
Nasdaq Global Market with no equity if it has a Market Value of
Listed Securities of $75 million and a Market Value of Unrestricted
Publicly Held Shares of $20 million, along with satisfying price,
publicly held shares, round lot holder and market maker
requirements. See also Section 102.06 of the NYSE Listed Company
Manual.
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As described below, Nasdaq believes that this fee change is
appropriate because Acquisition Companies listed on the Nasdaq Global
Market (``Global Market Acquisition Companies'') receive the same
services as Acquisition Companies listed on the Nasdaq Capital Market
(``Capital Market Acquisition Companies''). For example, Global Market
Acquisition Companies are not eligible to receive services from Nasdaq
under IM-5900-7, unlike other companies listing on the Nasdaq Global
Market but like Capital Market Acquisition Companies. Moreover, Global
Market Acquisition Companies require fewer regulatory resources than
other companies listing on the Nasdaq Global Market and the same
regulatory resources as Capital Market Acquisition Companies.
Therefore, Nasdaq proposes to adopt Entry and All-Inclusive Annual
Listing Fees for Global Market Acquisition Companies that are identical
to the fees currently charged Capital Market Acquisition Companies.
As proposed, Nasdaq would amend Rule 5910(a)(1) to include the
following entry fee schedule applicable to Global Market Acquisition
Companies, based on the number of shares outstanding: Up to 15 million
shares outstanding, $50,000; over 15 million shares outstanding,
$75,000. These are the same fees charged Capital Market Acquisition
Companies under Rule 5920(a)(1).\6\
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\6\ Nasdaq would also add sub-paragraph numbering to Rule
5910(a)(1) to improve readability and move language about the
deferral of the Entry Fee applicable to Acquisition Companies to new
Rule 5910(a)(1)(B).
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In addition, Nasdaq would amend Rule 5910(b)(2) to include the
following All-Inclusive Annual Fee schedule applicable to Global Market
Acquisition Companies, based on the number of shares outstanding: Up to
10 million shares outstanding, $44,000; between 10,000,001 and 50
million shares outstanding, $58,000; over 50 million shares
outstanding, $79,000. These are the same fees charged Capital Market
Acquisition Companies under Rule 5920(b)(2)(A).
The proposed Entry Fee and All-Inclusive Annual Fee would be lower
than the fees applicable to other companies listing on the Nasdaq
Global Market. However, Nasdaq notes that Acquisition Companies differ
in some important respects from traditional operating companies and
believes that these differences make it reasonable to adopt separate
fee schedules for Acquisition Companies.
An Acquisition Company, when it first lists under IM-5101-2, will
only be listed for a brief period of time while looking to complete a
business combination. Under IM-5101-2, an Acquisition Company must
complete a business combination within three years, although the
governing documents of many Acquisition Companies require the business
combination occur in a shorter time. If the Acquisition Company does
not complete a business combination it must return the funds held in
trust to the company's shareholders and dissolve the company.
Accordingly, Acquisition Companies must assess the economic value of a
listing on the basis of a potentially very brief period of listing.
Given the much shorter average length of an Acquisition Company's
listing, Nasdaq believes it is reasonable to charge Acquisition
Companies listed on the Nasdaq Global Market lower Entry Fees than
operating companies.
Further, upon first listing, Acquisition Companies are not eligible
to receive services from Nasdaq under IM-5900-7, unlike other companies
listing on the Nasdaq Global Market, and therefore Nasdaq believes that
it is reasonable to charge Acquisition Companies that list on the
Nasdaq Global Market lower Entry Fees than operating companies.\7\
While Acquisition Companies are searching for a target to complete a
business combination Nasdaq has observed that their shares typically
trade less frequently than comparable operating companies.\8\
Accordingly, they are less reliant on the Exchange's trading platform
and need less support from the Nasdaq Market Intelligence Desk and
require fewer regulatory resources to monitor trading. In addition, in
Nasdaq's experience their periodic filings tend to be simpler than
those of operating companies, they issue fewer press releases prior to
announcing their business combination, and their prices generally
remain stable resulting in very few deficiencies related to their price
or market value measures, all of which also leads to their requiring
fewer regulatory resources.\9\ Accordingly, Nasdaq believes that it is
reasonable to charge Acquisition Companies listed on the Nasdaq Global
Market lower All-Inclusive Annual Fees than operating companies.
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\7\ An Acquisition Company is offered certain services under IM-
5900-8 following the public announcement that the company entered
into a binding agreement for the business combination, however these
services are available to Acquisition Companies listed on either the
Nasdaq Global Market or the Nasdaq Capital Market.
\8\ This trading pattern will generally change once the
Acquisition Company announces its business combination target.
\9\ While Nasdaq has experienced few deficiencies recently,
historically some Acquisition Companies became non-compliant with
the holder requirement. See, e.g., Nasdaq Rule 5550(a)(3) (requiring
at least 300 Public Holders for continued listing on the Nasdaq
Capital Market).
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Nasdaq does not expect the financial impact of this proposal to be
material in terms of the level of listing fees collected from issuers.
Specifically, Nasdaq notes that without the proposed fee changes, many
of the Acquisition Companies that do not qualify for the Nasdaq Capital
Market would list on a market with lower listing fees instead of
[[Page 36809]]
on Nasdaq, in which case Nasdaq would not collect any fees. Moreover,
once an Acquisition Company completes a business combination it would
be subject to the higher fee schedule applicable to operating
companies.\10\ Accordingly, the Exchange believes that the proposed
rule change will not impact the Exchange's resource commitment to its
regulatory oversight of the listing process or its regulatory programs.
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\10\ Nasdaq notes that its All-Inclusive Annual Fee is assessed
on January 1 of each year and neither the Acquisition Company nor
the post-business combination entity would pay any additional fees
in the year of the business combination (irrespective of the form or
structure of that combination). However, the post-business
combination would begin paying the higher Annual Fee as of January 1
of the following year.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 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. 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.
The proposed fees are being implemented to avoid charging a higher
fee to an Acquisition Company that is unable to list on the Nasdaq
Capital Market but is able to list on the Nasdaq Global Market due to
insufficient shareholders' equity and to enable Nasdaq to compete with
other markets that can list such Acquisition Companies. Nasdaq believes
it is equitable under Section 6(b)(4) of the Act \13\ to charge Global
Market Acquisition Companies the same fees as Capital Market
Acquisition Companies given that they are treated the same regardless
of whether they are listed on the Global or Capital Market. For
example, as described below, neither is eligible to receive services
upon first listing, each receive identical services from Nasdaq upon
announcing a business combination and each uses similar regulatory
resources.
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\13\ 15 U.S.C. 78f(b)(4).
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Moreover, the Exchange believes that the proposal is not unfairly
discriminatory, because Acquisition Companies are shell companies with
no business operations, and, while searching for a target, their shares
trade less frequently on the Exchange than operating companies. In
Nasdaq's experience, Acquisition Companies are less reliant on the
Exchange's trading platform and need less support from the Nasdaq
Market Intelligence Desk and require fewer regulatory resources to
monitor trading. In addition, in Nasdaq's experience, their periodic
filings tend to be simpler than those of operating companies, they
issue fewer press releases prior to announcing their business
combination, and their prices generally remain stable resulting in very
few deficiencies related to their price or market value measures, all
of which also leads to their requiring fewer regulatory resources.
Further, Acquisition Companies are not eligible to receive services
from Nasdaq under IM-5900-7, unlike other companies listing on the
Nasdaq Global Market. While an Acquisition Company is offered certain
services under IM-5900-8 following the public announcement that the
company entered into a binding agreement for the business combination,
these services are available to Acquisition Companies listed on either
the Nasdaq Global Market or the Nasdaq Capital Market. Therefore,
Nasdaq believes that it is appropriate, and not unfairly
discriminatory, to charge lower fees to Global Market Acquisition
Companies than are charged to operating companies listed on the Nasdaq
Global Market.
Finally, Nasdaq competes for listings with the New York Stock
Exchange, which has adopted lower fees for Acquisition Companies than
for operating companies \14\ and can list certain Acquisition Companies
that have insufficient shareholders' equity to list on the Nasdaq
Capital Market, but can list on the Nasdaq Global Market. Nasdaq
believes that this competition is a non-discriminatory reason to reduce
the fees for Acquisition Companies seeking to list on the Nasdaq Global
Market.
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\14\ See Section 902.11 of the NYSE Listed Company Manual,
imposing a flat $85,000 Listing Fee for an Acquisition Company and
providing a limit of $85,000 on annual fees payable by an
Acquisition Company. Under NYSE Listing Rules, a SPAC can list
without regard to the amount of its stockholders' equity.
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For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
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.
The proposed new fee schedule will be available to all similarly
situated issuers on the same basis. The Exchange does not believe that
the proposed fees will have any meaningful effect on the competition
among issuers listed on the Exchange.
The Exchange operates in a highly competitive market in which
issuers can readily choose to list new securities on other exchanges
and transfer listings to other exchanges if they deem fee levels at
those other venues to be more favorable. Because competitors are free
to modify their own fees in response, and because issuers may change
their listing venue, the Exchange does not believe its proposed fee
change can impose any burden on intermarket competition. Nasdaq notes
that the New York Stock Exchange is its primary competitor for listing
Acquisition Companies and that market has already adopted a lower fee
for Acquisition Companies than for operating companies.\15\
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\15\ Id.
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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.\16\
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\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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
[[Page 36810]]
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#0674736a632b65696b6b636872754675636528616970"><span class="__cf_email__" data-cfemail="d8aaadb4bdf5bbb7b5b5bdb6acab98abbdbbf6bfb7ae">[email protected]</span></a>. Please include
File Number SR-NASDAQ-2021-055 on the subject line.
Paper Comments
<bullet> 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-2021-055. 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 website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2021-055 and should be submitted
on or before August 3, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-14800 Filed 7-12-21; 8:45 am]
BILLING CODE 8011-01-P
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