Notice2023-17301
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to a Stockholders' Agreement by and Among Nasdaq, Inc., Adenza Parent, LP, and the Other Parties Thereto
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
August 14, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 155 (Monday, August 14, 2023)</title>
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[Federal Register Volume 88, Number 155 (Monday, August 14, 2023)]
[Notices]
[Pages 55086-55088]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-17301]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98085; File No. SR-NASDAQ-2023-027]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to a Stockholders' Agreement by and Among Nasdaq, Inc., Adenza
Parent, LP, and the Other Parties Thereto
August 8, 2023.
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 July 28, 2023, The Nasdaq Stock Market LLC (the ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``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 is filing a proposed rule change regarding a
stockholders' agreement by and among the Exchange's parent corporation,
Nasdaq, Inc. (``Nasdaq''), Adenza Parent, LP, a Delaware limited
partnership (``Seller''), and the other parties thereto
(``Stockholders' Agreement''). The Stockholders' Agreement will be
implemented upon closing under the Merger Agreement (as defined below).
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
[[Page 55087]]
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
On June 10, 2023, Nasdaq entered into an Agreement and Plan of
Merger (the ``Merger Agreement'') by and among Nasdaq, Argus Merger Sub
1, Inc., a Delaware corporation and a direct wholly owned subsidiary of
Nasdaq, Argus Merger Sub 2, LLC, a Delaware limited liability company
and a direct wholly owned subsidiary of Nasdaq, Adenza Holdings, Inc.,
a Delaware corporation (``Adenza''), and Seller. Pursuant to the Merger
Agreement, and upon the terms and subject to the conditions therein,
Nasdaq will acquire 100% of the stock of Adenza (the ``Transaction'').
As a result of the Transaction, Seller is expected to hold, at closing,
approximately 15% of the outstanding Nasdaq common stock based upon the
outstanding shares of Nasdaq common stock as of June 9, 2023.\3\ The
shares to be held by Seller will be subject to Article Fourth of
Nasdaq's Amended and Restated Certificate of Incorporation, which
provides that 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 (including the Exchange), and facilitates the
self-regulatory subsidiaries' and the Commission's ability to carry out
their regulatory obligations under the Act.
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\3\ A copy of the Merger Agreement and a description of its
terms were filed by Nasdaq on Form 8-K on June 12, 2023 and are
available at: <a href="https://www.sec.gov/ix?doc=/Archives/edgar/data/0001120193/000119312523164839/d476077d8k.htm">https://www.sec.gov/ix?doc=/Archives/edgar/data/0001120193/000119312523164839/d476077d8k.htm</a>.
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Adenza and Seller are affiliates of certain funds managed by Thoma
Bravo, L.P., a Delaware limited partnership (``Thoma Bravo'').\4\ The
Merger Agreement contemplates that, at the closing, Nasdaq, Seller and
Thoma Bravo will enter into the Stockholders' Agreement. The
Stockholders' Agreement provides that, among other things, Thoma Bravo
will be entitled to propose one individual reasonably acceptable to
Nasdaq's Nominating & Governance Committee for nomination as director
for election to the Nasdaq Board (``Board Designee''), and such right
will exist for so long as Thoma Bravo, together with its controlled
affiliates (including Seller), continue to beneficially own at least
10% of the shares of Nasdaq common stock outstanding as of the closing
date. Nasdaq will: (i) include the Board Designee as a nominee to the
Nasdaq Board on each slate of nominees for election to the Nasdaq Board
proposed by management of Nasdaq, (ii) recommend the election of the
Board Designee to the stockholders of Nasdaq and (iii) without limiting
the foregoing, otherwise use its reasonable best efforts (which shall
include the solicitation of proxies) to cause the Board Designee to be
elected to the Nasdaq Board.
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\4\ Seller owns all of the issued and outstanding capital stock
of Adenza. Both Seller and Adenza are owned by Thoma Bravo.
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The Stockholders' Agreement relates solely to the Nasdaq Board, and
not to the boards of any of its subsidiaries, including the Exchange
Board. Nevertheless, the provisions of the Stockholders' Agreement
described above could be considered a proposed rule change of a
subsidiary that is a self-regulatory organization (``SRO''), if the
provisions were viewed as potentially impacting the governance of an
SRO in its capacity as wholly-owned subsidiary of Nasdaq. Accordingly,
the governing boards of directors of the Exchange and its affiliated
SROs have each reviewed the proposed change and determined that it
should be filed with the Commission.\5\
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\5\ The Exchange, Nasdaq BX, Inc. (``BX''), Nasdaq GEMX, LLC
(``GEMX''), Nasdaq ISE, LLC (``ISE''), Nasdaq MRX, LLC (``MRX''),
Nasdaq PHLX LLC (``Phlx''), Boston Stock Exchange Clearing
Corporation (``BSECC''), and Stock Clearing Corporation of
Philadelphia (``SCCP'') are each submitting this filing pursuant to
section 19(b)(3)(A) of the Act, 15 U.S.C. 78s(b)(3)(A)(iii).
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It is expected that the Board Designee, like the other directors of
the Nasdaq Board, would be nominated by the Nominating & Governance
Committee, the composition of which is subject to the independence
requirements of the Nasdaq By-Laws and Exchange Rule 5605.\6\ The Board
Designee must then be elected by the stockholders of Nasdaq, like the
other directors of the Nasdaq Board. The Nasdaq Board is currently
composed of 11 directors and is expected to increase to 12 directors
upon the closing of the Transaction. Thus, the Board Designee would
represent a small percentage (approximately 8.3%) of the Nasdaq Board.
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\6\ Section 4.13 of the Nasdaq By-Laws provide that the
Nominating & Governance Committee shall be appointed annually by the
Nasdaq Board and shall consist of two or more directors, each of
whom shall be an independent director within the meaning of the
rules of the Exchange. The number of Non-Industry Directors (i.e.,
directors without material ties to the securities industry) on the
Nominating & Governance Committee shall equal or exceed the number
of Industry Directors and at least two members of the committee
shall be Public Directors (i.e., directors who have no material
business relationship with a broker or dealer, Nasdaq or its
affiliates, or FINRA). Exchange Rule 5605, which governs Nasdaq as a
company whose securities are listed on the Exchange, requires
Nominating & Governance Committee members to satisfy the definition
of ``independence'' in Exchange Rule 5605 and IM-5605 and to
otherwise be deemed independent by the Nasdaq Board.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\7\ in general, and furthers the objectives of section
6(b)(1) of the Act,\8\ 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 Act and to comply, and to enforce compliance by its
participants, with the provisions of the Act, the rules and regulations
thereunder, and the rules of the Exchange.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(1).
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The proposal related to the Stockholders' Agreement 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 Act. In
particular, the proposed changes would not alter the limitations on
voting and ownership set forth in Article Fourth of Nasdaq's Amended
and Restated Certificate of Incorporation, 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. Further, as
discussed above, it is expected that the Board Designee, like the other
directors of the Nasdaq Board, would be nominated by the Nominating &
Governance Committee, whose members are subject to the independence
requirements of the Nasdaq By-Laws and Exchange Rule 5605. Further, the
Board Designee must then be elected by the stockholders of Nasdaq, like
the other directors of the Nasdaq Board. The Nasdaq Board is currently
composed of 11 directors and is expected to increase to 12 directors
upon the closing of the Transaction. Thus, the Board Designee would
[[Page 55088]]
represent a small percentage (approximately 8.3%) of the Nasdaq Board.
The Exchange also notes that the proposed rule change is
substantially similar to prior proposals by the Exchange or its
affiliated SROs related to Nasdaq stockholders' agreements that gave
similar rights to recommend Nasdaq Board designees.\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\ See Securities Exchange Act Release No. 57099 (January 4,
2008), 73 FR 1901 (January 10, 2008) (SR-NASDAQ-2008-002) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating
to Nasdaq Stockholders' Agreement Between the Nasdaq Stock Market,
Inc. and Borse Dubai Limited). See also Securities Exchange Act
Release No. 63786 (January 27, 2011), 76 FR 6168 (February 3, 2011)
(SR-NASDAQ-2011-013, SR-PHLX-2011-08, SR-BX-2011-004) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Changes Relating
to a Stockholders' Agreement Between the NASDAQ OMX Group, Inc. and
Investor AB).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Because the proposed rule change is related solely to Thoma Bravo's
right to nominate the Board Designee to the Nasdaq Board pursuant to
the Stockholders' Agreement 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)(iii) of the Act \10\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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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A proposed rule change filed under Rule 19b-4(f)(6) \12\ of the Act
normally does not become operative prior to 30 days after the date of
filing. However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay contained in Rule
19b-4(f)(6)(iii).\14\ The Commission believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest as the proposal raises no new or novel issues.
Accordingly, the Commission hereby waives the 30-day operative delay
and designates the proposal operative upon filing.\15\
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(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. 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#1e6c6b727b337d7173737b706a6d5e6d7b7d30797168"><span class="__cf_email__" data-cfemail="0e7c7b626b236d6163636b607a7d4e7d6b6d20696178">[email protected]</span></a>. Please include
file number SR-NASDAQ-2023-027 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-2023-027.
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="https://www.sec.gov/rules/sro.shtml">https://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 a.m. and 3 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. Do
not include personal identifiable information in submissions; you
should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-NASDAQ-2023-027 and
should be submitted on or before September 5, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17301 Filed 8-11-23; 8:45 am]
BILLING CODE 8011-01-P
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