Notice2022-11060
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Nasdaq Amended and Restated Certificate of Incorporation
Primary source
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
May 24, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 100 (Tuesday, May 24, 2022)</title>
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[Federal Register Volume 87, Number 100 (Tuesday, May 24, 2022)]
[Notices]
[Pages 31588-31590]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-11060]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94940; File No. SR-Phlx-2022-21]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the Nasdaq
Amended and Restated Certificate of Incorporation
May 18, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on May 6, 2022, Nasdaq PHLX LLC (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II 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 the Amended and Restated Certificate
of Incorporation (``Certificate'') of its parent corporation, Nasdaq,
Inc. (``Nasdaq'' or the ``Company''), to increase Nasdaq's authorized
share capital.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules">https://listingcenter.nasdaq.com/rulebook/phlx/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
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Exchange has prepared summaries, set forth in sections A, B, and C
below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Nasdaq
Certificate \3\ to increase the total number of authorized shares of
Nasdaq common stock, par value $0.01 per share (``Common Stock'').
Specifically, the Exchange proposes to amend Article Fourth, Section A
such that the total number of shares of Stock (i.e., capital stock)
that Nasdaq is authorized to issue would be increased from 330,000,000
to 930,000,000 shares, and the portion of that total constituting
Common Stock would be changed from 300,000,000 to 900,000,000 shares.
As amended, Article Fourth, Section A of the Certificate would provide:
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\3\ Nasdaq owns 100% of the equity interest in the Exchange. The
Exchange's affiliates, Boston Stock Exchange Clearing Corporation,
Nasdaq BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC,
The Nasdaq Stock Market LLC, and Stock Clearing Corporation of
Philadelphia will each concurrently submit substantially the same
rule filings to propose the changes described herein.
The total number of shares of Stock which Nasdaq shall have the
authority to issue is Nine Hundred Thirty Million (930,000,000),
consisting of Thirty Million (30,000,000) shares of Preferred Stock,
par value $.01 per share (hereinafter referred to as ``Preferred
Stock''), and Nine Hundred Million (900,000,000) shares of Common
Stock, par value $.01 per share (hereinafter referred to as ``Common
Stock'').\4\
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\4\ Nasdaq currently has no Preferred Stock outstanding.
As noted above, the proposed amendments to the Certificate were
approved by the Nasdaq Board of Directors (``Nasdaq Board'') on March
23, 2022. The proposed amendments to the Certificate would be effective
when filed with the Secretary of State of Delaware, which would not
occur until approval of the amendments by the stockholders of Nasdaq is
obtained at the 2022 Annual Meeting of the Stockholders on June 22,
2022 and until this proposed rule change becomes effective and
operative.
The trading price of Nasdaq's Common Stock has risen significantly
over the past several years. Since Nasdaq first became a publicly
traded company in 2002, the total number of authorized shares of Common
Stock has remained constant at 300,000,000 shares. However, over the
last five years, the trading price of Nasdaq's Common Stock has
increased by approximately 162%.\5\ As the trading price of Nasdaq's
Common Stock has risen, the Nasdaq Board has carefully evaluated the
effect of the trading price of the Common Stock on the liquidity and
marketability of the Common Stock. The Nasdaq Board believes that this
price appreciation may be affecting the liquidity of the Common Stock,
making it more difficult to efficiently trade and potentially less
attractive to certain investors. Accordingly, the Nasdaq Board approved
pursuing a 3-for-1 stock split by way of a stock dividend, pursuant to
which the holders of record of shares of Common Stock would receive, by
way of a dividend, two shares of Common Stock for each share of Common
Stock held by such holder (the ``Stock Dividend''). The Nasdaq Board's
approval of the Stock Dividend was contingent upon this proposed rule
change becoming effective and operative, and Nasdaq stockholder
approval of the proposed amendments to the Certificate.
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\5\ The price of one share of Common Stock on March 31, 2017 was
$69.45 and the closing market price of one share of Common Stock on
April 1, 2022 was $181.92 as reported on the Nasdaq Stock Market.
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The number of shares of Common Stock proposed to be issued in the
Stock Dividend exceeds Nasdaq's authorized but unissued shares of
Common Stock. The proposed rule change would increase Nasdaq's
authorized shares of Common Stock and shares of capital stock
sufficient to allow Nasdaq to effectuate the Stock Dividend.
The proposed changes would not otherwise alter the Certificate,
including the limitations on voting and ownership set forth in Article
Fourth, Section C of the Certificate that generally provides no person
who beneficially owns shares of common stock or preferred stock of
Nasdaq in excess of 5% of the then-outstanding securities generally
entitled to vote may vote the shares in excess of 5%. This limitation
mitigates the potential for any Nasdaq shareholder to exercise undue
control over the operations of Nasdaq's self-regulatory subsidiaries,
and facilitates the self-regulatory subsidiaries' and the Commission's
ability to carry out their regulatory obligations under the Act.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Section
6(b)(1) of the Act,\7\ in that it enables the Exchange to be so
organized as to have the capacity to be able to carry out the purposes
of the Exchange Act and to comply, and to enforce compliance by its
members and persons associated with its members, with the provisions of
the Exchange Act, the rules and regulations thereunder, and the rules
of the Exchange.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(1).
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The proposal to increase Nasdaq's authorized shares of Common Stock
and shares of capital stock sufficient to allow Nasdaq to effectuate
the Stock Dividend would not impact the Exchange's ability to be so
organized as to have the capacity to be able to carry out the purposes
of the Exchange Act. In particular, the proposed changes would not
alter the limitations on voting and ownership set forth in Article
Fourth, Section C of the Certificate, and so the proposed changes would
not enable a person to exercise undue control over the operations of
Nasdaq's self-regulatory subsidiaries or to restrict the ability of the
Commission or the Exchange to effectively carry out their regulatory
oversight responsibilities under the Act.
The Exchange also believes that the proposal is consistent with
Section 6(b)(5) of the Act \8\ because it would not impact the
Exchange's governance or regulatory structure, which would continue to
be designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.
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\8\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change would 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, because by increasing Nasdaq's authorized shares of
Common Stock and shares of capital stock sufficient to allow Nasdaq to
effectuate the Stock Dividend, the proposed rule change will facilitate
broader ownership of Nasdaq.
The Exchange also notes that the proposed rule change is
substantially similar to a prior proposal by Intercontinental Exchange,
Inc. (``ICE''), which is the holding company for three national
securities exchanges, including the New York Stock Exchange. The ICE
proposal amended ICE's Certificate of
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Incorporation to effectuate a similar stock split as proposed by the
Exchange herein.\9\ As such, the Exchange does not believe that its
proposal raises any new or novel issues not already considered by the
Commission.
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\9\ In particular, the ICE proposal increased ICE's total number
of authorized shares of ICE common stock in order to effectuate a 5-
for-1 stock split by way of a stock dividend. See Securities
Exchange Act Release No. 78992 (September 29, 2016), 81 FR 69092
(October 5, 2016) (SR-NYSE-2016-57, SR-NYSEArca-2016-119, and SR-
NYSEMKT-2016-80) (hereinafter, ``ICE Approval'').
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B. Self-Regulatory Organization's Statement on Burden on Competition
Because the proposed rule change relates solely to the number of
authorized shares of Common Stock and shares of capital stock of the
Company and not to the operations of the Exchange, 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#ea989f868fc7898587878f849e99aa998f89c48d859c"><span class="__cf_email__" data-cfemail="5a282f363f77393537373f342e291a293f39743d352c">[email protected]</span></a>. Please include
File Number SR-Phlx-2022-21 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-Phlx-2022-21. 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-Phlx-2022-21 and should be submitted on
or before June 14, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-11060 Filed 5-23-22; 8:45 am]
BILLING CODE 8011-01-P
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