81_FR_63702 81 FR 63523 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order Approving Proposed Rule Change To Modify the Complimentary Services Offered to Certain New Listings

81 FR 63523 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order Approving Proposed Rule Change To Modify the Complimentary Services Offered to Certain New Listings

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 179 (September 15, 2016)

Page Range63523-63525
FR Document2016-22155

Federal Register, Volume 81 Issue 179 (Thursday, September 15, 2016)
[Federal Register Volume 81, Number 179 (Thursday, September 15, 2016)]
[Notices]
[Pages 63523-63525]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-22155]



[[Page 63523]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78806; File No. SR-NASDAQ-2016-098]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order 
Approving Proposed Rule Change To Modify the Complimentary Services 
Offered to Certain New Listings

September 9, 2016.

I. Introduction

    On July 11, 2016, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to modify the complimentary services offered to 
certain new listings. The proposed rule change was published for 
comment in the Federal Register on July 28, 2016.\3\ No comment letters 
were received in response to the Notice. This order approves the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 78392 (July 22, 
2016), 81 FR 49705 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange offers complimentary services to companies listing on 
the Nasdaq Global and Global Select Markets in connection with an 
initial public offering, upon emerging from bankruptcy, or in 
connection with a spin-off or carve-out from another company 
(``Eligible New Listings'') and to companies that switch their listing 
from the New York Stock Exchange (``NYSE'') to the Nasdaq Global or 
Global Select Markets (``Eligible Switches'' and, with Eligible New 
Listings, ``Eligible Companies'').\4\ According to the Exchange, this 
program offers valuable services to newly listing companies designed to 
help ease the transition of becoming a public company or switching 
markets, makes listing on Nasdaq more attractive to these companies, 
and provides Nasdaq Corporate Solutions the opportunity to demonstrate 
the value of its services and forge a relationship with the company.\5\ 
Currently, Eligible Companies receive a whistleblower hotline, investor 
relations Web site, press release distribution services, interactive 
webcasting, and market analytic tools, and may receive a market 
surveillance service.\6\ As discussed in more detail below, the 
Exchange proposed to modify its current offerings to Eligible 
Companies.
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    \4\ See Notice, supra note 3, at 49705. See also Securities 
Exchange Act Release Nos. 65963 (December 15, 2011), 76 FR 79262 
(December 21, 2011) (SR-NASDAQ-2011-122) (``Original Approval 
Order'') and 72669 (July 24, 2014), 79 FR 44234 (July 30, 2014) (SR-
NASDAQ-2014-058) (``2014 Approval Order'').
    \5\ See Notice, supra note 3, at 49705.
    \6\ See Nasdaq Rule IM-5900-7(b)-(c). Only Eligible Companies 
with a market capitalization of $750 million or more receive the 
market surveillance service. The Exchange proposed to rename this 
service as ``stock surveillance'' to better reflect its purpose.
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    The Exchange currently offers Eligible Companies that have a market 
capitalization of $750 million or more a stock surveillance tool, 
through which an analyst attempts to determine who is buying and 
selling the company's stock.\7\ While any public company can use this 
offering, the Exchange stated in its proposal that it may not be an 
appropriate fit for some companies, such as those that are closely held 
or otherwise have low liquidity or low volume, which may prioritize 
different investor relations tools over stock surveillance.\8\ 
Therefore, the Exchange proposed to allow companies eligible for this 
service to choose from the existing stock surveillance offering or 
other alternatives, which Nasdaq stated are also designed to help 
companies identify current owners, potential buyers or sellers of their 
stock, or otherwise enhance their investor relations efforts.\9\ 
Specifically, Eligible Companies that have a market capitalization of 
$750 million or more would be allowed to choose the existing stock 
surveillance offering or from among the following alternatives: (i) A 
global targeting package, where an investor targeting specialist will 
help focus the company's investor relations efforts on appropriate 
investors, tailor messaging to those investors' interests and measure 
the company's impact on their holdings; (ii) monthly ownership 
analytics and event driven targeting, which provide a monthly 
shareholder analysis and tracking report, which an analyst will help 
interpret during a monthly call, and a shareholder targeting plan 
around one event each year, such as a roadshow or investor conference; 
or (iii) an annual perception study designed to identify how the 
company is perceived by key stakeholders and provide the company with 
actionable recommendations for enhancing its perception in the 
market.\10\ The approximate retail value of the proposed new services 
ranges from $35,000 to $46,000 per year, as compared to the approximate 
retail value of $51,000 for the existing stock surveillance tool.\11\
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    \7\ See Nasdaq Rule IM-5900-7(c).
    \8\ See Notice, supra note 3, at 49705.
    \9\ See id.
    \10\ See proposed Rule IM-5900-7(a) under section being renamed 
``Market Advisory Tools.''
    \11\ See Notice, supra note 3, at 49705. The Exchange also 
proposed to update the description of the stock surveillance tool to 
clarify that it is a single, dedicated analyst who provides that 
service, as opposed to the team approach used for the proposed 
alternative market advisory tools, and to note that the analyst 
attempts to identify institutional buyers and sellers in the 
company's stock. See id.
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    The Exchange also proposed to create a new tier of services for 
Eligible Companies with a market capitalization of $5 billion or more. 
As noted in the Original Approval Order and the 2014 Approval Order, 
the Exchange believes that it is appropriate to offer different 
services based on a company's market capitalization given that larger 
companies generally will need more and different governance, 
communication, and intelligence services.\12\ According to the 
Exchange, companies with a market capitalization of $5 billion or more 
can benefit from, and are more likely to purchase at the end of the 
complimentary period, investor targeting or perception studies in 
addition to surveillance services because they have more complex 
investor relations functions and frequently have more shareholders and 
a greater change in their shareholdings.\13\ As such, the Exchange 
proposed to offer these companies, with a market capitalization of $5 
billion or more, the choice of a second market advisory tool.
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    \12\ See Notice, supra note 3, at 49706. See also Original 
Approval Order, supra note 4, at 79265.
    \13\ See Notice, supra note 3, at 49706.
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    The Exchange also proposed to modify the complimentary services 
offered to Eligible Switches. In particular, the Exchange proposed to 
increase the number of users of the market analytic tool to three users 
for Eligible Switches with a market capitalization of $750 million or 
more but less than $5 billion and to four users for Eligible Switches 
with a market capitalization of $5 billion or more.\14\ In addition, 
Nasdaq proposed to increase the term of the complimentary services from 
three years to four years for any Eligible Switch with a market 
capitalization of $750 million or greater.\15\
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    \14\ See proposed Rule IM-5900-7(c)(2)-(3). This service has a 
retail value of approximately $29,000 per year for two users, 
$40,000 for three users, and $51,000 for four users. See Notice, 
supra note 3, at 49706.
    \15\ See proposed Rule IM-5900-7(c)(2)-(3). The Exchange noted 
that this proposal would restore some features and the term of 
complimentary services that was previously in effect for such 
companies. See Notice, supra note 3, at 49706.

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[[Page 63524]]

    The Exchange also proposed to revise the values and descriptions of 
the complimentary services offered.\16\ In addition, the Exchange 
proposed to amend the description of the market analytic tool to 
reflect the addition of mobile access to the users of that service and 
to add the value of that offering for three and four users ($40,000 and 
$51,000, respectively).\17\ In its filing, the Exchange also proposed 
to rename the ``Interactive Webcasting'' service ``Audio Webcasting'' 
to reflect the voice-only nature of the service, which is delivered 
through a platform branded with the company's name and logo that allows 
real-time questions from the audience, and to describe the four audio 
webcasts as a ``package'' to reflect the basis for the approximate 
retail value provided.\18\ In addition, the Exchange proposed to rename 
the current ``Press Release'' service to ``Disclosure Services'' to 
better reflect the availability of EDGAR and XBRL services, and to 
specify that these services are provided as an annual stipend usable 
with Nasdaq Corporate Solutions.\19\ The Exchange also proposed to 
delete the reference to factors affecting the number of press releases 
available because the revised rule would explicitly state that an 
annual stipend is provided and would emphasize disclosure services 
generally rather than just press releases.\20\
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    \16\ In particular, the approximate retail value would be 
updated from $15,000 to $16,000 for the investor relations Web site, 
from $30,000 to $29,000 for the market analytic tool for two users, 
and from $50,000 to $51,000 for the stock surveillance tool. See 
proposed Rule IM-5900-7(a). The Exchange also proposed to eliminate 
rounding in the total retail value of the services offered to each 
category of Eligible Company. See Notice, supra note 3, at 49706. In 
addition, the Exchange proposed to modify the introductory note to 
Rule IM-5900-7 to reference the historical changes to the program 
and explain the impact of the revisions to companies that are 
already listed, and to reorganize the rule to enhance its 
readability and usability. See id.
    \17\ See proposed Rule IM-5900-7(a).
    \18\ See Notice, supra note 3, at 49706.
    \19\ See proposed Rule IM-5900-7(a).
    \20\ See Notice, supra note 3, at 49706.
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    The Exchange stated that if a company has a choice among different 
complimentary services under the proposed rule, the company must make 
its selection when it first begins to use a complimentary service and 
will not be permitted to subsequently change to a different 
complimentary service offered in the package.\21\ The Exchange noted in 
its proposal that a company can discontinue using a service at any time 
without penalty and can also elect to purchase from Nasdaq Corporate 
Solutions a service alternative that was previously declined or a 
comparable service from another competitor.\22\
---------------------------------------------------------------------------

    \21\ See id.
    \22\ See id.
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    The Exchange noted that any company receiving services under the 
terms of the Original Approval Order or the 2014 Approval Order on the 
date this proposal is approved may elect to receive services under the 
revised terms in this proposal. If a company elects to receive services 
under this proposal, the services that the company is eligible to 
receive will be determined based on its status and market 
capitalization at the time of its original listing and the length of 
time that services are available to the company under the revised 
package will be calculated from the company's original listing 
date.\23\
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    \23\ See id.
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III. Discussion and Commission Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act.\24\ Specifically, the Commission finds that the proposal is 
consistent with Sections 6(b)(4) \25\ and 6(b)(5) of the Act \26\ in 
particular, in that the proposed rule is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
Exchange members, issuers, and other persons using the Exchange's 
facilities, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. Moreover, the Commission 
believes that the proposed rule change is consistent with Section 
6(b)(8) of the Act \27\ in that it does not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act.
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    \24\ 15 U.S.C. 78f. In approving this proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \25\ 15 U.S.C. 78f(b)(4).
    \26\ 15 U.S.C. 78f(b)(5).
    \27\ 15 U.S.C. 78f(b)(8).
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    The Commission believes that it is consistent with the Act for the 
Exchange to revise the products and services it offers to companies. 
According to Nasdaq, the stock surveillance tool that certain Eligible 
Companies receive may not be an appropriate fit for some of these 
companies, such as those that are closely held or otherwise have low 
liquidity or low volume.\28\ Accordingly, these companies may derive 
more value from the other market advisory services, as described above, 
that Nasdaq is now going to be offering as a choice, in addition to the 
stock surveillance tool, to Eligible Companies with a market 
capitalization of $750 million or more.
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    \28\ See Notice, supra note 3 at 49705.
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    The Commission also believes that it is consistent with the Act for 
the Exchange to create a new tier of services for Eligible Companies 
with a market capitalization of $5 billion or more and to offer varying 
services to different categories of issuers since larger capitalized 
companies generally will need and use more services.\29\ The Exchange 
represents that companies with a market capitalization of $5 billion or 
more have more complex investor relations functions and therefore can 
benefit from additional market advisory services and are more likely to 
purchase additional services at the end of the complimentary 
period.\30\ In addition, the Exchange's proposal would provide Eligible 
Switches additional user seats for the market analytic tool than those 
provided to similarly capitalized Eligible New Listings. In making this 
distinction, the Exchange has stated that Eligible Switches are more 
likely to benefit from additional market analytic user seats than 
Eligible New Listings because these companies generally have larger 
investor relations teams already in place, whereas Eligible New 
Listings receive support from investment banks and others for a period 
of time after listing as their investor relations programs mature and 
therefore have, in the Exchange's view, less need for additional user 
seats.\31\ Moreover, Nasdaq stated in its proposal that Eligible 
Switches will, in its view, forego more services paid for by their 
former exchange and that larger Eligible Switches will forego even more 
services. In support of this, Nasdaq notes that NYSE recently modified 
its services offered to listed companies so that they are now valued 
higher so that some companies will need a greater incentive

[[Page 63525]]

to forego the services offered by NYSE and switch to Nasdaq.\32\ Based 
on the above, the Commission believes that the Exchange has provided a 
sufficient basis for providing additional services to certain Eligible 
New Listings and Eligible Switches, as well as varying services to 
these different categories of listings, and that these changes do not 
unfairly discriminate among issuers and reflect the competitive 
environment for exchange listings for transfers from a competing 
exchange.\33\
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    \29\ See Original Approval Order, supra note 4, at 79266 
(finding that it is reasonable for Nasdaq to provide different 
services to tiers based on market capitalization since larger 
capitalized companies generally will need and use more services). 
See also Notice, supra note 3, at 49707. The Commission notes that, 
as stated in the 2014 Approval Order, all listed companies receive 
some services from Nasdaq, including Nasdaq Online and the Market 
Intelligence Desk. See 2014 Approval Order, supra note 4, at 44235.
    \30\ See Notice, supra note 3, at 49707. As noted by the 
Exchange in its prior filing, it offers more services to larger 
companies because they need more and different governance, 
communications, and intelligence services. See Original Approval 
Order, supra note 4, at 79265.
    \31\ See Notice, supra note 3, at 49707. The Commission notes 
that in a prior filing Nasdaq reduced its market analytic tools to 
all Eligible Companies from four users to two users based on 
Nasdaq's experience with company use of the service.
    \32\ See id. at 49706. See also Securities Exchange Act Release 
No. 76127 (October 9, 2015), 80 FR 62584 (October 16, 2015) (SR-
NYSE-2015-36).
    \33\ See 2014 Approval Order, supra note 4, at 44235.
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    Further, the Commission believes that it is consistent with the Act 
for the Exchange to reinstate the four year term for services provided 
to Eligible Switches with a market capitalization of $750 million or 
more. According to the Exchange, this change reflects Nasdaq's ongoing 
assessment of the competitive market for listings.\34\ Specifically, 
the Exchange has represented that it faces competition in the market 
for listing services and that it competes in part by offering valuable 
services to listed companies.\35\ The Exchange states that the proposed 
changes will result in a more enticing package for potential listings 
and therefore will enhance competition among listing exchanges.\36\ 
Accordingly, the Commission believes that the proposed rule reflects 
the current competitive environment for exchange listings among 
national securities exchanges, and is appropriate and consistent with 
Section 6(b)(8) of the Act.\37\
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    \34\ See Notice, supra note 3, at 49707. The Commission notes 
that the Original Approval Order found four years of services for 
Eligible Switches as consistent with the Act. As noted above, Nasdaq 
had reduced services to Eligible Switches from four to three years 
in 2014 and is now proposing to change back to four years of 
services for these transfers for competitive reasons. See id. at 
49706 & n.13. See also supra note 32 and accompanying text.
    \35\ See Notice, supra note 3, at 49707 & n.13.
    \36\ See id. at 49708.
    \37\ 15 U.S.C. 78f(b)(8).
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    Finally, the Commission believes that it is reasonable, and in fact 
required by Section 19(b) of the Exchange Act, that Nasdaq amend IM-
5900-7 to update the rule text to reflect the actual retail values of 
the services offered, which have changed since the original adoption of 
the rule.\38\ The Commission also believes it is reasonable for the 
Exchange to make certain non-substantive changes, as described above, 
to the names and descriptions of certain services provided. This 
provides greater transparency to Nasdaq's rules and the fees applicable 
to companies listing on the Exchange.
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    \38\ We would expect Nasdaq, consistent with Section 19(b) of 
the Act, to periodically update the retail values of services 
offered should they change. This will help to provide transparency 
to listed companies on the value of the free services they receive 
and the actual costs associated with listing on Nasdaq.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\39\ that the proposed rule change (SR-NASDAQ-2016-098), be, and 
hereby is, approved.
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    \39\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-22155 Filed 9-14-16; 8:45 am]
 BILLING CODE 8011-01-P



                                                                         Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices                                                         63523

                                                SECURITIES AND EXCHANGE                                 hotline, investor relations Web site,                     of the proposed new services ranges
                                                COMMISSION                                              press release distribution services,                      from $35,000 to $46,000 per year, as
                                                                                                        interactive webcasting, and market                        compared to the approximate retail
                                                [Release No. 34–78806; File No. SR–
                                                NASDAQ–2016–098]
                                                                                                        analytic tools, and may receive a market                  value of $51,000 for the existing stock
                                                                                                        surveillance service.6 As discussed in                    surveillance tool.11
                                                Self-Regulatory Organizations; The                      more detail below, the Exchange                              The Exchange also proposed to create
                                                Nasdaq Stock Market LLC; Order                          proposed to modify its current offerings                  a new tier of services for Eligible
                                                Approving Proposed Rule Change To                       to Eligible Companies.                                    Companies with a market capitalization
                                                Modify the Complimentary Services                          The Exchange currently offers Eligible                 of $5 billion or more. As noted in the
                                                Offered to Certain New Listings                         Companies that have a market                              Original Approval Order and the 2014
                                                                                                        capitalization of $750 million or more a                  Approval Order, the Exchange believes
                                                September 9, 2016.                                      stock surveillance tool, through which                    that it is appropriate to offer different
                                                I. Introduction                                         an analyst attempts to determine who is                   services based on a company’s market
                                                                                                        buying and selling the company’s                          capitalization given that larger
                                                   On July 11, 2016, The Nasdaq Stock                   stock.7 While any public company can                      companies generally will need more and
                                                Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)                 use this offering, the Exchange stated in                 different governance, communication,
                                                filed with the Securities and Exchange                  its proposal that it may not be an                        and intelligence services.12 According
                                                Commission (‘‘Commission’’) pursuant                    appropriate fit for some companies,                       to the Exchange, companies with a
                                                to Section 19(b)(1) of the Securities                   such as those that are closely held or                    market capitalization of $5 billion or
                                                Exchange Act of 1934 (‘‘Act’’) 1 and Rule               otherwise have low liquidity or low                       more can benefit from, and are more
                                                19b–4 thereunder,2 a proposed rule                      volume, which may prioritize different                    likely to purchase at the end of the
                                                change to modify the complimentary                      investor relations tools over stock                       complimentary period, investor
                                                services offered to certain new listings.               surveillance.8 Therefore, the Exchange                    targeting or perception studies in
                                                The proposed rule change was                            proposed to allow companies eligible                      addition to surveillance services
                                                published for comment in the Federal                    for this service to choose from the                       because they have more complex
                                                Register on July 28, 2016.3 No comment                  existing stock surveillance offering or                   investor relations functions and
                                                letters were received in response to the                other alternatives, which Nasdaq stated                   frequently have more shareholders and
                                                Notice. This order approves the                         are also designed to help companies
                                                proposed rule change.                                                                                             a greater change in their
                                                                                                        identify current owners, potential                        shareholdings.13 As such, the Exchange
                                                II. Description of the Proposed Rule                    buyers or sellers of their stock, or                      proposed to offer these companies, with
                                                Change                                                  otherwise enhance their investor                          a market capitalization of $5 billion or
                                                   The Exchange offers complimentary                    relations efforts.9 Specifically, Eligible                more, the choice of a second market
                                                services to companies listing on the                    Companies that have a market                              advisory tool.
                                                Nasdaq Global and Global Select                         capitalization of $750 million or more                       The Exchange also proposed to
                                                Markets in connection with an initial                   would be allowed to choose the existing                   modify the complimentary services
                                                public offering, upon emerging from                     stock surveillance offering or from                       offered to Eligible Switches. In
                                                bankruptcy, or in connection with a                     among the following alternatives: (i) A                   particular, the Exchange proposed to
                                                spin-off or carve-out from another                      global targeting package, where an                        increase the number of users of the
                                                company (‘‘Eligible New Listings’’) and                 investor targeting specialist will help                   market analytic tool to three users for
                                                to companies that switch their listing                  focus the company’s investor relations                    Eligible Switches with a market
                                                from the New York Stock Exchange                        efforts on appropriate investors, tailor                  capitalization of $750 million or more
                                                (‘‘NYSE’’) to the Nasdaq Global or                      messaging to those investors’ interests                   but less than $5 billion and to four users
                                                Global Select Markets (‘‘Eligible                       and measure the company’s impact on                       for Eligible Switches with a market
                                                Switches’’ and, with Eligible New                       their holdings; (ii) monthly ownership                    capitalization of $5 billion or more.14 In
                                                Listings, ‘‘Eligible Companies’’).4                     analytics and event driven targeting,                     addition, Nasdaq proposed to increase
                                                According to the Exchange, this                         which provide a monthly shareholder                       the term of the complimentary services
                                                program offers valuable services to                     analysis and tracking report, which an                    from three years to four years for any
                                                newly listing companies designed to                     analyst will help interpret during a                      Eligible Switch with a market
                                                help ease the transition of becoming a                  monthly call, and a shareholder                           capitalization of $750 million or
                                                public company or switching markets,                    targeting plan around one event each                      greater.15
                                                makes listing on Nasdaq more attractive                 year, such as a roadshow or investor
                                                to these companies, and provides                        conference; or (iii) an annual perception                   11 See Notice, supra note 3, at 49705. The

                                                                                                        study designed to identify how the                        Exchange also proposed to update the description
                                                Nasdaq Corporate Solutions the                                                                                    of the stock surveillance tool to clarify that it is a
                                                opportunity to demonstrate the value of                 company is perceived by key                               single, dedicated analyst who provides that service,
                                                its services and forge a relationship with              stakeholders and provide the company                      as opposed to the team approach used for the
                                                the company.5 Currently, Eligible                       with actionable recommendations for                       proposed alternative market advisory tools, and to
                                                                                                        enhancing its perception in the                           note that the analyst attempts to identify
                                                Companies receive a whistleblower                                                                                 institutional buyers and sellers in the company’s
                                                                                                        market.10 The approximate retail value                    stock. See id.
                                                  1 15  U.S.C. 78s(b)(1).                                                                                           12 See Notice, supra note 3, at 49706. See also
                                                  2 17                                                    6 See Nasdaq Rule IM–5900–7(b)–(c). Only
                                                        CFR 240.19b–4.                                                                                            Original Approval Order, supra note 4, at 79265.
                                                   3 See Securities Exchange Act Release No. 78392      Eligible Companies with a market capitalization of          13 See Notice, supra note 3, at 49706.
sradovich on DSK3GMQ082PROD with NOTICES




                                                (July 22, 2016), 81 FR 49705 (‘‘Notice’’).              $750 million or more receive the market                     14 See proposed Rule IM–5900–7(c)(2)–(3). This
                                                   4 See Notice, supra note 3, at 49705. See also       surveillance service. The Exchange proposed to            service has a retail value of approximately $29,000
                                                Securities Exchange Act Release Nos. 65963              rename this service as ‘‘stock surveillance’’ to better   per year for two users, $40,000 for three users, and
                                                (December 15, 2011), 76 FR 79262 (December 21,          reflect its purpose.                                      $51,000 for four users. See Notice, supra note 3, at
                                                                                                          7 See Nasdaq Rule IM–5900–7(c).
                                                2011) (SR–NASDAQ–2011–122) (‘‘Original                                                                            49706.
                                                                                                          8 See Notice, supra note 3, at 49705.
                                                Approval Order’’) and 72669 (July 24, 2014), 79 FR                                                                  15 See proposed Rule IM–5900–7(c)(2)–(3). The
                                                44234 (July 30, 2014) (SR–NASDAQ–2014–058)                9 See id.
                                                                                                                                                                  Exchange noted that this proposal would restore
                                                (‘‘2014 Approval Order’’).                                10 See proposed Rule IM–5900–7(a) under section         some features and the term of complimentary
                                                   5 See Notice, supra note 3, at 49705.                being renamed ‘‘Market Advisory Tools.’’                                                               Continued




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                                                63524                     Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices

                                                   The Exchange also proposed to revise                  Solutions a service alternative that was              addition to the stock surveillance tool,
                                                the values and descriptions of the                       previously declined or a comparable                   to Eligible Companies with a market
                                                complimentary services offered.16 In                     service from another competitor.22                    capitalization of $750 million or more.
                                                addition, the Exchange proposed to                         The Exchange noted that any                            The Commission also believes that it
                                                amend the description of the market                      company receiving services under the                  is consistent with the Act for the
                                                analytic tool to reflect the addition of                 terms of the Original Approval Order or               Exchange to create a new tier of services
                                                mobile access to the users of that service               the 2014 Approval Order on the date                   for Eligible Companies with a market
                                                and to add the value of that offering for                this proposal is approved may elect to                capitalization of $5 billion or more and
                                                three and four users ($40,000 and                        receive services under the revised terms              to offer varying services to different
                                                $51,000, respectively).17 In its filing, the             in this proposal. If a company elects to              categories of issuers since larger
                                                Exchange also proposed to rename the                     receive services under this proposal, the             capitalized companies generally will
                                                ‘‘Interactive Webcasting’’ service                       services that the company is eligible to              need and use more services.29 The
                                                ‘‘Audio Webcasting’’ to reflect the voice-               receive will be determined based on its               Exchange represents that companies
                                                only nature of the service, which is                     status and market capitalization at the               with a market capitalization of $5
                                                delivered through a platform branded                     time of its original listing and the length           billion or more have more complex
                                                with the company’s name and logo that                    of time that services are available to the            investor relations functions and
                                                allows real-time questions from the                      company under the revised package will                therefore can benefit from additional
                                                audience, and to describe the four audio                 be calculated from the company’s                      market advisory services and are more
                                                webcasts as a ‘‘package’’ to reflect the                 original listing date.23                              likely to purchase additional services at
                                                basis for the approximate retail value                                                                         the end of the complimentary period.30
                                                                                                         III. Discussion and Commission
                                                provided.18 In addition, the Exchange                                                                          In addition, the Exchange’s proposal
                                                                                                         Findings
                                                proposed to rename the current ‘‘Press                                                                         would provide Eligible Switches
                                                Release’’ service to ‘‘Disclosure                           The Commission has carefully                       additional user seats for the market
                                                Services’’ to better reflect the                         reviewed the proposed rule change and                 analytic tool than those provided to
                                                availability of EDGAR and XBRL                           finds that it is consistent with the                  similarly capitalized Eligible New
                                                services, and to specify that these                      requirements of Section 6 of the Act.24               Listings. In making this distinction, the
                                                services are provided as an annual                       Specifically, the Commission finds that               Exchange has stated that Eligible
                                                stipend usable with Nasdaq Corporate                     the proposal is consistent with Sections              Switches are more likely to benefit from
                                                Solutions.19 The Exchange also                           6(b)(4) 25 and 6(b)(5) of the Act 26 in               additional market analytic user seats
                                                proposed to delete the reference to                      particular, in that the proposed rule is              than Eligible New Listings because these
                                                factors affecting the number of press                    designed to provide for the equitable                 companies generally have larger
                                                releases available because the revised                   allocation of reasonable dues, fees, and              investor relations teams already in
                                                rule would explicitly state that an                      other charges among Exchange                          place, whereas Eligible New Listings
                                                annual stipend is provided and would                     members, issuers, and other persons                   receive support from investment banks
                                                emphasize disclosure services generally                  using the Exchange’s facilities, and is               and others for a period of time after
                                                rather than just press releases.20                       not designed to permit unfair                         listing as their investor relations
                                                   The Exchange stated that if a                         discrimination between customers,                     programs mature and therefore have, in
                                                company has a choice among different                     issuers, brokers, or dealers. Moreover,               the Exchange’s view, less need for
                                                complimentary services under the                         the Commission believes that the                      additional user seats.31 Moreover,
                                                proposed rule, the company must make                     proposed rule change is consistent with               Nasdaq stated in its proposal that
                                                its selection when it first begins to use                Section 6(b)(8) of the Act 27 in that it              Eligible Switches will, in its view,
                                                a complimentary service and will not be                  does not impose any burden on                         forego more services paid for by their
                                                permitted to subsequently change to a                    competition not necessary or                          former exchange and that larger Eligible
                                                different complimentary service offered                  appropriate in furtherance of the                     Switches will forego even more services.
                                                in the package.21 The Exchange noted in                  purposes of the Act.                                  In support of this, Nasdaq notes that
                                                its proposal that a company can                             The Commission believes that it is                 NYSE recently modified its services
                                                discontinue using a service at any time                  consistent with the Act for the Exchange              offered to listed companies so that they
                                                without penalty and can also elect to                    to revise the products and services it                are now valued higher so that some
                                                purchase from Nasdaq Corporate                           offers to companies. According to                     companies will need a greater incentive
                                                                                                         Nasdaq, the stock surveillance tool that
                                                services that was previously in effect for such          certain Eligible Companies receive may                   29 See Original Approval Order, supra note 4, at

                                                                                                         not be an appropriate fit for some of                 79266 (finding that it is reasonable for Nasdaq to
                                                companies. See Notice, supra note 3, at 49706.
                                                                                                                                                               provide different services to tiers based on market
                                                  16 In particular, the approximate retail value         these companies, such as those that are               capitalization since larger capitalized companies
                                                would be updated from $15,000 to $16,000 for the         closely held or otherwise have low                    generally will need and use more services). See also
                                                investor relations Web site, from $30,000 to $29,000
                                                for the market analytic tool for two users, and from
                                                                                                         liquidity or low volume.28 Accordingly,               Notice, supra note 3, at 49707. The Commission
                                                                                                         these companies may derive more value                 notes that, as stated in the 2014 Approval Order, all
                                                $50,000 to $51,000 for the stock surveillance tool.                                                            listed companies receive some services from
                                                See proposed Rule IM–5900–7(a). The Exchange             from the other market advisory services,              Nasdaq, including Nasdaq Online and the Market
                                                also proposed to eliminate rounding in the total         as described above, that Nasdaq is now                Intelligence Desk. See 2014 Approval Order, supra
                                                retail value of the services offered to each category
                                                of Eligible Company. See Notice, supra note 3, at
                                                                                                         going to be offering as a choice, in                  note 4, at 44235.
                                                                                                                                                                  30 See Notice, supra note 3, at 49707. As noted
                                                49706. In addition, the Exchange proposed to
                                                                                                           22 See id.                                          by the Exchange in its prior filing, it offers more
                                                modify the introductory note to Rule IM–5900–7 to
                                                                                                                                                               services to larger companies because they need
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                                                reference the historical changes to the program and        23 See id.
                                                                                                                                                               more and different governance, communications,
                                                explain the impact of the revisions to companies           24 15 U.S.C. 78f. In approving this proposed rule
                                                                                                                                                               and intelligence services. See Original Approval
                                                that are already listed, and to reorganize the rule to   change, the Commission has considered the             Order, supra note 4, at 79265.
                                                enhance its readability and usability. See id.           proposed rule’s impact on efficiency, competition,       31 See Notice, supra note 3, at 49707. The
                                                  17 See proposed Rule IM–5900–7(a).                     and capital formation. See 15 U.S.C. 78c(f).
                                                  18 See Notice, supra note 3, at 49706.                   25 15 U.S.C. 78f(b)(4).
                                                                                                                                                               Commission notes that in a prior filing Nasdaq
                                                                                                                                                               reduced its market analytic tools to all Eligible
                                                  19 See proposed Rule IM–5900–7(a).                       26 15 U.S.C. 78f(b)(5).
                                                                                                                                                               Companies from four users to two users based on
                                                  20 See Notice, supra note 3, at 49706.                   27 15 U.S.C. 78f(b)(8).
                                                                                                                                                               Nasdaq’s experience with company use of the
                                                  21 See id.                                               28 See Notice, supra note 3 at 49705.               service.



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                                                                          Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices                                                   63525

                                                to forego the services offered by NYSE                  Exchange to make certain non-                         Prohibition 5 on Pilot Securities in the
                                                and switch to Nasdaq.32 Based on the                    substantive changes, as described above,              third test group. The proposed rule
                                                above, the Commission believes that the                 to the names and descriptions of certain              change is available on the Exchange’s
                                                Exchange has provided a sufficient basis                services provided. This provides greater              Web site at www.nyse.com, at the
                                                for providing additional services to                    transparency to Nasdaq’s rules and the                principal office of the Exchange, and at
                                                certain Eligible New Listings and                       fees applicable to companies listing on               the Commission’s Public Reference
                                                Eligible Switches, as well as varying                   the Exchange.                                         Room.
                                                services to these different categories of
                                                listings, and that these changes do not                 IV. Conclusion                                        II. Self-Regulatory Organization’s
                                                unfairly discriminate among issuers and                   It is therefore ordered, pursuant to                Statement of the Purpose of, and
                                                reflect the competitive environment for                 Section 19(b)(2) of the Act,39 that the               Statutory Basis for, the Proposed Rule
                                                exchange listings for transfers from a                  proposed rule change (SR–NASDAQ–                      Change
                                                competing exchange.33                                   2016–098), be, and hereby is, approved.                 In its filing with the Commission, the
                                                   Further, the Commission believes that                  For the Commission, by the Division of              self-regulatory organization included
                                                it is consistent with the Act for the                   Trading and Markets, pursuant to delegated            statements concerning the purpose of,
                                                Exchange to reinstate the four year term                authority.40                                          and basis for, the proposed rule change
                                                for services provided to Eligible                       Brent J. Fields,                                      and discussed any comments it received
                                                Switches with a market capitalization of                Secretary.                                            on the proposed rule change. The text
                                                $750 million or more. According to the                                                                        of those statements may be examined at
                                                                                                        [FR Doc. 2016–22155 Filed 9–14–16; 8:45 am]
                                                Exchange, this change reflects Nasdaq’s                                                                       the places specified in Item IV below.
                                                                                                        BILLING CODE 8011–01–P
                                                ongoing assessment of the competitive                                                                         The Exchange has prepared summaries,
                                                market for listings.34 Specifically, the                                                                      set forth in sections A, B, and C below,
                                                Exchange has represented that it faces                                                                        of the most significant parts of such
                                                                                                        SECURITIES AND EXCHANGE
                                                competition in the market for listing                                                                         statements.
                                                                                                        COMMISSION
                                                services and that it competes in part by
                                                offering valuable services to listed                                                                          A. Self-Regulatory Organization’s
                                                companies.35 The Exchange states that                   [Release No. 34–78801; File No. SR–                   Statement of the Purpose of, and the
                                                                                                        NYSEARCA–2016–123]
                                                the proposed changes will result in a                                                                         Statutory Basis for, the Proposed Rule
                                                more enticing package for potential                     Self-Regulatory Organizations; NYSE                   Change
                                                listings and therefore will enhance                     Arca, Inc.; Notice of Filing of Proposed              1. Purpose
                                                competition among listing exchanges.36                  Rule Change Amending Rule 7.46
                                                Accordingly, the Commission believes                    Relating to the Tick Size Pilot Program                 The Exchange proposes to amend
                                                that the proposed rule reflects the                                                                           Rule 7.46 to (1) describe system
                                                current competitive environment for                     September 9, 2016.                                    functionality requirements necessary to
                                                exchange listings among national                           Pursuant to Section 19(b)(1) 1 of the              implement the Plan 6 and (2) clarify the
                                                securities exchanges, and is appropriate                Securities Exchange Act of 1934 (the                  operation of certain exceptions to the
                                                and consistent with Section 6(b)(8) of                  ‘‘Act’’) 2 and Rule 19b–4 thereunder,3                Trade-at Prohibition 7 on Pilot Securities
                                                the Act.37                                              notice is hereby given that, on August                in the third test group (‘‘Test Group
                                                   Finally, the Commission believes that                25, 2016, NYSE Arca, Inc. (the                        Three’’).8
                                                it is reasonable, and in fact required by               ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with               The Plan is designed to study and
                                                Section 19(b) of the Exchange Act, that                 the Securities and Exchange
                                                Nasdaq amend IM–5900–7 to update the                                                                          assess the impact of increment
                                                                                                        Commission (the ‘‘Commission’’) the                   conventions on the liquidity and trading
                                                rule text to reflect the actual retail                  proposed rule change as described in
                                                values of the services offered, which                                                                         of the common stocks of small
                                                                                                        Items I, II, and III below, which Items               capitalization companies. The Exchange
                                                have changed since the original                         have been prepared by the self-
                                                adoption of the rule.38 The Commission                                                                        proposes to amend Rule 7.46, which has
                                                                                                        regulatory organization. The                          been adopted on a two-year pilot period
                                                also believes it is reasonable for the                  Commission is publishing this notice to               that coincides with the pilot period for
                                                                                                        solicit comments on the proposed rule                 the Plan, which is currently scheduled
                                                   32 See id. at 49706. See also Securities Exchange
                                                                                                        change from interested persons.                       to begin on October 3, 2016.
                                                Act Release No. 76127 (October 9, 2015), 80 FR
                                                62584 (October 16, 2015) (SR–NYSE–2015–36).             I. Self-Regulatory Organization’s
                                                   33 See 2014 Approval Order, supra note 4, at
                                                                                                        Statement of the Terms of Substance of                   5 Rule 7.6(e)(4)(A) defines the ‘‘Trade-at
                                                44235.                                                                                                        Prohibition’’ to mean the prohibition against
                                                   34 See Notice, supra note 3, at 49707. The           the Proposed Rule Change
                                                                                                                                                              executions by a Trading Center of a sell order for
                                                Commission notes that the Original Approval Order          The Exchange proposes to amend                     a Pilot Security at the price of a Protected Bid or
                                                found four years of services for Eligible Switches as                                                         the execution of a buy order for a Pilot Security at
                                                consistent with the Act. As noted above, Nasdaq
                                                                                                        Rule 7.46 to (1) describe system
                                                                                                                                                              the price of a Protected Offer during regular trading
                                                had reduced services to Eligible Switches from four     functionality requirements necessary to               hours.
                                                to three years in 2014 and is now proposing to          implement the Plan to Implement a Tick                   6 See Securities and Exchange Act Release No.
                                                change back to four years of services for these         Size Pilot Program submitted to the                   74892 (May 6, 2015), 80 FR 27513 (File No. 4–657)
                                                transfers for competitive reasons. See id. at 49706                                                           (‘‘Tick Plan Approval Order’’). See, also, Securities
                                                & n.13. See also supra note 32 and accompanying
                                                                                                        Commission pursuant to Rule 608 of
                                                                                                                                                              and Exchange Act Release No. 76382 (November 6,
                                                text.                                                   Regulation NMS 4 under the Act (the                   2015) (File No. 4–657), 80 FR 70284 (File No. 4–
                                                   35 See Notice, supra note 3, at 49707 & n.13.        ‘‘Plan’’) and (2) clarify the operation of            657) (November 13, 2015), which extended the pilot
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                                                   36 See id. at 49708.                                 certain exceptions to the Trade-at                    period commencement date from May 6, 2015 to
                                                   37 15 U.S.C. 78f(b)(8).                                                                                    October 3, 2016. The Plan was submitted to the
                                                   38 We would expect Nasdaq, consistent with
                                                                                                          39 15
                                                                                                                                                              Commission pursuant to Rule 608 of Regulation
                                                                                                                U.S.C. 78s(b)(2).                             NMS. 17 CFR 242.608.
                                                Section 19(b) of the Act, to periodically update the      40 17 CFR 200.30–3(a)(12).                             7 Unless otherwise specified, capitalized terms
                                                retail values of services offered should they change.     1 15 U.S.C. 78s(b)(1).
                                                This will help to provide transparency to listed                                                              used in this rule filing are based on the defined
                                                                                                          2 15 U.S.C. 78a.
                                                companies on the value of the free services they                                                              terms of the Plan.
                                                                                                          3 17 CFR 240.19b–4.
                                                receive and the actual costs associated with listing                                                             8 See infra notes 14–17 and accompanying text for

                                                on Nasdaq.                                                4 17 CFR 242.608.                                   a description of Test Group Three.



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Document Created: 2018-02-09 13:18:25
Document Modified: 2018-02-09 13:18:25
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 63523 

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