Notice2024-25639
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify the Package of Complimentary Services Provided to Certain Eligible Switches and To Modify the Definition of an Eligible Switch
Primary source
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Published
November 5, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 214 (Tuesday, November 5, 2024)</title>
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[Federal Register Volume 89, Number 214 (Tuesday, November 5, 2024)]
[Notices]
[Pages 87914-87917]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-25639]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101483; File No. SR-NASDAQ-2024-059]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Modify the Package of
Complimentary Services Provided to Certain Eligible Switches and To
Modify the Definition of an Eligible Switch
October 30, 2024.
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 October 17, 2024, 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 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 modify the package of complimentary
services provided to certain Eligible Switches and to modify the
definition of an Eligible Switch.
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
[[Page 87915]]
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 offers complimentary services under Listing Rule IM-5900-7
to Eligible New Listings \3\ and Eligible Switches \4\ newly listing on
Nasdaq.\5\ Nasdaq believes that the complimentary service program
offers valuable services to newly listing companies, designed to help
ease the transition of becoming a public company or switching markets,
and makes listing on Nasdaq more attractive to these companies. The
services offered include a whistleblower hotline, investor relations
website, disclosure services for earnings or other press releases,
webcasting, market analytic tools, environmental, social and governance
services, and may include market advisory tools such as stock
surveillance (collectively the ``Service Package'').\6\ Based on
Nasdaq's experience with the program and given the competitive
landscape, Nasdaq is filing this proposed rule change to modify the
manner in which Market Advisory Tools are offered to Eligible Switches
that have a market capitalization of $750 million or more, as described
below. Nasdaq is also proposing to modify the definition of an Eligible
Switch to include a company (other than a company listed under Listing
Rule IM-5101-2) switching its listing to the Global or Global Select
Market not only from the New York Stock Exchange, as currently provided
by Listing Rule IM-5900-7(a)(2), but also from any other national
securities exchange. Similarly, Nasdaq is proposing to modify the
definition of an Eligible Switch to also include a company that
switched its listing from another national securities exchange and
listed on Nasdaq under Listing Rule IM-5101-2 after the company
publicly announced that it entered into a binding agreement for a
business combination and that subsequently satisfies the conditions in
Listing Rule IM-5101-2(b) and lists on the Global or Global Select
Market in conjunction with that business combination.\7\
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\3\ IM-5900-7 defines an Eligible New Listing as ``a Company
listing on the Global or Global Select Market in connection with:
(i) an initial public offering in the United States, including
American Depository Receipts (other than a Company listed under IM-
5101-2), (ii) upon emerging from bankruptcy, (iii) in connection
with a spin-off or carve-out from another Company, (iv) in
connection with a Direct Listing as defined in IM-5315-1 (including
the listing of American Depository Receipts), or (v) in conjunction
with a business combination that satisfies the conditions in IM-
5101-2(b).''
\4\ IM-5900-7 defines an Eligible Switch as ``a Company: (i)
(other than a Company listed under IM-5101-2) switching its listing
from the New York Stock Exchange to the Global or Global Select
Markets, or (ii) that has switched its listing from the New York
Stock Exchange and listed on Nasdaq under IM-5101-2 after the
Company publicly announced that it entered into a binding agreement
for a business combination and that subsequently satisfies the
conditions in IM-5101-2(b) and lists on the Global or Global Select
Market in conjunction with that business combination.''
\5\ IM-5900-7A describes the Service Package available to
companies that listed before March 12, 2021, the effective date of
SR-Nasdaq-2021-002. See Securities Exchange Act Release No. 91318
(March 12, 2021), 86 FR 14774 (March 18, 2021) (modifying the
package of complimentary services provided to eligible companies and
memorializing as IM-5900-7A the services offered to eligible
companies that listed before the effective date of the change).
\6\ In addition, all companies listed on Nasdaq receive other
standard services from Nasdaq, including Nasdaq Online and the
Market Intelligence Desk.
\7\ The definition of an Eligible Switch already includes such a
company that was previously listed on the New York Stock Exchange.
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Currently, an Eligible Switch that has a market capitalization of
$750 million or more but less than $5 billion receives the following
complimentary services for four years: Whistleblower Hotline, Investor
Relations website, $20,000 per year of Disclosure Services, Audio
Webcasting, Media Monitoring/Social Listening, Market Analytic Tools
for three users, the Core ESG Software Solution, ESG Education & Sector
Benchmarking Services, and the choice of one Market Advisory Tool.\8\
Instead of the choice of one of the three Market Advisory Tools (e.g.,
Stock Surveillance, Global Targeting, or an Annual Perception Study)
for four years,\9\ Nasdaq proposes to modify Listing Rule IM-5900-
7(d)(2) to provide an Eligible Switch that has a market capitalization
of $750 million or more but less than $5 billion with one Annual
Perception Study during the four-year period and the choice of the
remaining two Market Advisory Tools (i.e., Stock Surveillance or Global
Targeting) for four years.
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\8\ The total retail value of these services is up to
approximately $220,200 per year. The company also receives one
Virtual Event during the four-year period, which has a retail value
of approximately $11,700. In addition, one-time development fees of
approximately $6,000 to establish the services in the first year is
waived. See Listing Rule IM-5900-7(d)(2).
\9\ Once the Company elects a service it cannot subsequently
change to a different alternative, including in a subsequent year.
See Listing Rule IM-5900-7(e).
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Nasdaq also proposes to modify Listing Rule IM-5900-7(d)(2) to
reflect that an Eligible Switch that had a market capitalization of
$750 million or more but less than $5 billion that listed on Nasdaq
prior to the effective date of this proposed rule change is not
eligible for the one Annual Perception Study during the four-year
period but received, upon listing (as provided by the rules in effect
at that time), the choice of Stock Surveillance, Global Targeting or
Annual Perception Study.
Currently, an Eligible Switch that has a market capitalization of
$5 billion or more receives the following complimentary services for
four years: Whistleblower Hotline, Investor Relations website, $20,000
per year of Disclosure Services, Audio Webcasting, Media Monitoring/
Social Listening, Market Analytic Tools for four users, the Advanced
ESG Software Solution, ESG Education & Sector Benchmarking Service,
$60,000 per year of ESG Advisory Services, and the choice of two Market
Advisory Tools.\10\ Instead of the choice of two of the three Market
Advisory Tools (e.g., Stock Surveillance, Global Targeting, or Annual
Perception Study) for four years, Nasdaq proposes to modify Listing
Rule IM-5900-7(d)(3) to provide an Eligible Switch that has a market
capitalization of $5 billion or more with one Annual Perception Study
during the four-year period and with both of the remaining Market
Advisory Tools (i.e., Stock Surveillance and Global Targeting) for four
years.
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\10\ The total retail value of these services is up to
approximately $373,700 per year. The company also receives one
Virtual Event during the four-year period, which has a retail value
of approximately $11,700. In addition, one-time development fees of
approximately $26,500 to establish the services in the first year is
waived. See Listing Rule IM-5900-7(d)(3).
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Nasdaq also proposes to modify Listing Rule IM-5900-7(d)(3) to
reflect that an Eligible Switch that had a market capitalization of $5
billion or more that listed on Nasdaq prior to the effective date of
this proposed rule change is not eligible for the one Annual Perception
Study during the four-year period but received, upon listing (as
provided by the rules in effect at that time), the choice of two of the
following three services: Stock Surveillance, Global Targeting or
Annual Perception Study.
Nasdaq believes that these changes will increase the value of the
Service Package to the companies affected by this proposal because the
perception study will be provided in addition to the Stock Surveillance
and/or Global Targeting, whereas currently some companies may choose
services that have higher value without benefiting
[[Page 87916]]
from the perception study.\11\ Nasdaq also believes these changes will
streamline the offering of services to Eligible Switches because
Eligible Switches with a market capitalization of $750 million or more,
generally, would benefit from a perception study that leverages
extensive capital markets relationships and benchmark data amplifying
the company's efforts to elevate their story, enhance stakeholder
engagement, identify risk and attract new capital. Accordingly, Nasdaq
believes these changes will make the package more attractive to the
affected companies.
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\11\ Stock Surveillance, Global Targeting, and Annual Perception
Study have a retail value of approximately $56,500, $48,000, and
$45,000 per year, respectively. In describing the value of the
services in the rule text, Nasdaq presumed that a company would use
stock surveillance and global targeting, where there is the choice
of two services; and that a company would use the Stock
Surveillance, where there is the choice of one service.
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Finally, Nasdaq proposes to modify the definition of an Eligible
Switch to include a company (other than a company listed under Listing
Rule IM-5101-2) switching its listing to the Global or Global Select
Market not only from the New York Stock Exchange, as currently provided
by Listing Rule IM-5900-7(a)(2), but also from any other national
securities exchange. Similarly, Nasdaq proposes to modify the
definition of an Eligible Switch to include a company that switched its
listing from another national securities exchange and listed on Nasdaq
under Listing Rule IM-5101-2 after the company publicly announced that
it entered into a binding agreement for a business combination and that
subsequently satisfies the conditions in Listing Rule IM-5101-2(b) and
lists on the Global or Global Select Market in conjunction with that
business combination.\12\ Nasdaq believes that given the competitive
landscape and the increasing number of listing venues, issuers
switching its listing to the Global or Global Select Market from other
national securities exchanges will likely bring greater future value to
Nasdaq than will other issuers by listing on its market.
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\12\ Listing Rule IM-5101-2 imposes additional listing
requirements on a company whose business plan is to complete an
initial public offering (``IPO'') and engage in a merger or
acquisition with one or more unidentified companies within a
specific period of time (``Acquisition Companies''). An Acquisition
Company does not have an operating business and tends to trade
infrequently and in a tight range until the company completes an
acquisition. Therefore, these Acquisition Companies do not generally
need shareholder communication services, market analytic tools or
market advisory tools and, upon listing (whether as an IPO or when
switching from another market), these Acquisition Companies do not
receive complimentary services from Nasdaq under Listing Rule IM-
5900-7. However, a company completing a business combination with a
Nasdaq-listed Acquisition Company is eligible to receive services
under Listing Rule IM-5900-7 when it lists on the Nasdaq Global or
Global Select Market in conjunction with a business combination that
satisfies the conditions in Listing Rule IM-5101-2(b). At this
point, the Acquisition Company transitions to being an operating
company and has a similar need as other companies for shareholder
communication services, market analytic tools and market advisory
tools.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\14\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest. It is also consistent with this provision because it is not
designed to permit unfair discrimination between issuers. Nasdaq also
believes that the proposed rule change is consistent with the
provisions of Sections 6(b)(4) \15\ and 6(b)(8),\16\ in that the
proposal is designed, among other things, to provide for the equitable
allocation of reasonable dues, fees, and other charges among Exchange
members and issuers and other persons using its facilities and that the
rules of the Exchange do not impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ 15 U.S.C. 78f(4).
\16\ 15 U.S.C. 78f(8).
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Nasdaq faces competition in the market for listing services,\17\
and competes, in part, by offering valuable services to companies.
Nasdaq believes that it is reasonable to offer complimentary services
to attract and retain listings as part of this competition. All
similarly situated companies are eligible for the same package of
services. Nasdaq believes that the proposed changes to the manner in
which Market Advisory Tools are offered to Eligible Switches that have
a market capitalization of $750 million or more will help eligible
companies leverage extensive capital markets relationships and
benchmark data amplifying the company's efforts to elevate their story,
enhance stakeholder engagement, identify risk and attract new capital.
While the proposed changes will affect services that will be available
only to Eligible Switches with a market capitalization of $750 million
or more, Nasdaq does not believe that it is unfairly discriminatory to
offer different services based on a company's market capitalization
given that larger companies generally will need more and different
Market Advisory Tools, and that those issuers will likely bring greater
future value to Nasdaq than will other issuers with lower market
capitalization by switching to its market.\18\
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\17\ The Justice Department has noted the intense competitive
environment for exchange listings. See ``NASDAQ OMX Group Inc. and
Intercontinental Exchange Inc. Abandon Their Proposed Acquisition Of
NYSE Euronext After Justice Department Threatens Lawsuit'' (May 16,
2011), available at <a href="http://www.justice.gov/atr/public/press_releases/2011/271214.htm">http://www.justice.gov/atr/public/press_releases/2011/271214.htm</a>.
\18\ See Securities Exchange Act Release No. 65963 (December 15,
2011), 76 FR 79262 at 79265 (December 21, 2011).
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Nasdaq believes that the proposal to modify the definition of an
Eligible Switch to include companies (including companies listed under
Listing Rule IM-5101-2) switching their listing to the Nasdaq Global or
Global Select Market not only from the New York Stock Exchange, as
currently provided by Listing Rule IM-5900-7(a)(2), but also from any
other national securities exchange is designed to provide for the
equitable allocation of reasonable dues, fees, and other charges among
Exchange members and issuers and other persons using its facilities and
does not impose any burden on competition not necessary or appropriate
in furtherance of the purposes of the Exchange Act because the proposal
is, in part, designed to enhance competition with other national
securities exchanges. Nasdaq believes that given the competitive
landscape and the increasing number of listing venues, issuers
switching its listing to the Global or Global Select Market from other
national securities exchanges will likely bring greater future value to
Nasdaq than will other issuers by listing on its market.
Nasdaq represents, and this proposed rule change will help ensure,
that individual listed companies are not given specially negotiated
packages of products or services to list, or remain listed, which the
Commission has previously stated would raise unfair discrimination
issues under the Exchange Act.\19\
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\19\ See Exchange Act Release No. 79366, 81 FR 85663 at 85665
(citing Securities Exchange Act Release No. 65127 (August 12, 2011),
76 FR 51449, 51452 (August 18, 2011) (approving NYSE-2011-20)).
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[[Page 87917]]
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. As noted above, Nasdaq faces
competition in the market for listing services, and competes, in part,
by offering valuable services to companies. Nasdaq believes that it is
reasonable to offer complimentary services to attract and retain
listings as part of this competition. The proposed rule changes reflect
that competition, but do not impose any burden on the competition with
other exchanges. Other exchanges can also offer similar services to
companies, thereby increasing competition to the benefit of those
companies and their shareholders.
Further, all similarly situated companies are eligible for the same
package of services. While the proposed changes will affect services
that will be available only to Eligible Switches with a market
capitalization of $750 million or more, Nasdaq does not believe that it
is unfairly discriminatory to offer different services based on a
company's market capitalization given that larger companies generally
will need more and different Market Advisory Tools, and that those
issuers will likely bring greater future value to Nasdaq by switching
to its market than would other issuers.
Nasdaq also believes that the proposal to modify the definition of
an Eligible Switch to include companies switching their listing not
only from the New York Stock Exchange, as currently provided by Listing
Rule IM-5900-7(a)(2), but also from any other national securities
exchange will eliminate a potential existing burden on competition
between companies listed on different exchanges, in that it will treat
exchange-listed companies in a uniform manner, regardless of which
national securities exchange they are currently listed on. Further,
this change is designed to increase competition with other national
securities exchanges.
Accordingly, Nasdaq does not believe the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act, as amended.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#83f1f6efe6aee0eceeeee6edf7f0c3f0e6e0ade4ecf5"><span class="__cf_email__" data-cfemail="becccbd2db93ddd1d3d3dbd0cacdfecddbdd90d9d1c8">[email protected]</span></a>. Please include
file number SR-NASDAQ-2024-059 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-2024-059. 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-2024-059 and should
be submitted on or before November 26, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25639 Filed 11-4-24; 8:45 am]
BILLING CODE 8011-01-P
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