[Federal Register Volume 63, Number 27 (Tuesday, February 10, 1998)]
[Notices]
[Pages 6789-6790]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3278]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39613; File No. SR-NASD-97-83]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving Proposed Rule Change Relating to Listing 
Fees for Nasdaq National Market Issuers

February 2, 1998.

I. Introduction

    On November 13, 1997, the National Association of Securities 
Dealers, Inc. (``NASD'' or ``Association''), through its wholly owned 
subsidiary, the Nasdaq Stock Market, Inc. (``Nasdaq''), filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder \2\ to 
amend Nasdaq listing fees for Nasdaq National Market issuers. On 
December 3, 1997, the NASD filed Amendment No. 1 to the proposal.\3\
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Robert E. Aber, Vice President and General 
Counsel, Nasdaq, to Katherine A. England, Assistant Director, 
Division of Market Regulation, Commission, dated December 3, 1997.
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    Notice of the proposed rule change, including Amendment No. 1, was 
published in the Federal Register.\4\ One comment was received, which 
is described below.
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    \4\ Securities Exchange Act Release No. 39441 (Dec. 11, 1997), 
62 FR 66707 (Dec. 19, 1997).
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II. Description of the Proposal

    Nasdaq's proposal would amend NASD Rule 4510 to revise the fees for 
Nasdaq National Market issuers and would make conforming changes to 
NASD Rule 4520. The proposed rule change will adjust both the Entry Fee 
and the Annual Fee for Nasdaq National Market issuers, effective 
January 1, 1998. Nasdaq has determined that an increase in the Entry 
Fee and the Annual Fee for issuers included on the Nasdaq National 
Market is necessary. Nasdaq has not filed an adjustment to its fee 
rates since the fall of 1991. Nasdaq has represented that, since that 
time, it has committed increased resources in efforts to strengthen 
market qualifications, to communicate with investors, and to prepare 
for closer integration of the world's equity markets.
    The proposed rule change also revises references to the type of 
information on which the fees are based to include, in addition to the 
issuer's most recent periodic report required to be filed with the 
issuer's appropriate regulatory authority, more recent information held 
by Nasdaq. The NASD has made other technical changes to Rules 4510 and 
4520.

III. Summary of Comments

    One commenter responded to the proposal.\5\ The commenter, which 
opposed the proposal, indicates that it is a Nasdaq-listed company and, 
as a result, would be subject to the proposed fee increase. The 
commenter argues that the proposed increase in the listing fee is 
``excessive,'' contending that Nasdaq collects fees in excess of the 
level of its costs. The commenter also states that many of Nasdaq's 
enhancements are electronic and should reduce mailing and paper costs. 
The commenter expresses concern that a ``significant portion'' of the 
Nasdaq budget ``has gone to administrative salaries, overhead and 
marketing.'' The commenter notes that it has been approached by an 
exchange regarding listing there and indicates that the proposed fee 
increase will increase the likelihood that the commenter will in fact 
delist from Nasdaq and pursue another marketplace for listing.
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    \5\See Letter from James R. Maronick, Vice President, Finance, 
Crown Resources, to Douglas A. Patterson, Senior Vice President, 
Nasdaq, dated Dec. 19, 1997 (copy of which was forwarded to the 
Division of Market Regulation, Commission).
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    By letter dated January 23, 1998, Nasdaq responded to the comment 
letter.\6\ In its response, Nasdaq states that, with respect to the 
commenter's assertion that the proposed issuer listing fee increase is 
excessive, Nasdaq has not increased fees since the fall of 1991. Nasdaq 
re-emphasizes a point made in its initial filing, that ``since 1991 
Nasdaq has committed increased resources in efforts to strengthen 
market qualifications, to communicate with investors, and to prepare 
for close integration of the world's equity markets.'' Nasdaq also 
notes its development of new information services for investors and 
issuers, such as nasdaq.com and Nasdaq Online. Nasdaq states that such 
additional services were not envisioned when the 1991 filing fee was 
instated.
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    \6\ See Letter from Arnold P. Golub, Attorney, Nasdaq, to 
Katherine England, Esq., Assistant Director, Division of Market 
Regulation, Commission, dated January 23, 1998.
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    Nasdaq further notes in its response letter that the fee increase 
also would be used ``to support the continued expansion and 
technological enhancements of Nasdaq's qualification and market 
surveillance systems and programs.'' Nasdaq believes that such 
initiatives will ``enhance the overall quality of companies listed on 
Nasdaq, foster the protection of investors, and promote the integrity 
of The Nasdaq Stock Market.'' Nasdaq asserts that the proposed fee 
increase ``reflects additional costs that Nasdaq incurs for services 
provided to issuers.''

IV. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities association, and, in 
particular, Sections 15A(b)(5) and 15A(b)(6) of the Act. Section 
15A(b)(5) requires that the rules of a national securities association 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers using the Nasdaq system. 
Section 15A(b)(6) requires, among other things, that the rules of a 
national securities association not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
    Since 1991, the last time that the NASD raised the fees it charges 
issuers, there has been tremendous change in the Nasdaq stock market, 
both in terms of volume and market developments. Volume on Nasdaq has 
increased significantly over the past several years, suggesting that 
investor interest in Nasdaq-listed companies is growing. This growth 
has resulted in investor expectations for Nasdaq to render services 
commensurate with its market position. For example, the NASD 
represented in its proposal that during the last eighteen months Nasdaq 
has incurred substantial incremental annual expenses in developing and 
implementing new information services for issuers and investors. These 
services include nasdaq.com and Nasdaq Online. While the NASD believes 
that such services add value to a Nasdaq listing, the associated costs 
were not envisioned in 1991 when issuer listing fees were set at their 
current levels.
    The NASD has represented that the proposed fee increase will also 
be used to support the continued expansion and technological 
enhancements of Nasdaq's qualification and market surveillance systems 
and programs. Initiatives include the development of an automated 
issuer risk assessment system and an automated Internet surveillance 
system. The NASD has represented that additional resources will be 
committed to additional listing qualifications staff to ensure 
compliance with the recently approved increase in Nasdaq's listing

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requirements.\7\ These initiatives, in concert with the additional 
services that Nasdaq is providing to companies and investors, should 
enhance the overall quality of companies listed on Nasdaq, foster the 
protection of investors, and promote the integrity of The Nasdaq Stock 
Market.
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    \7\ See Securities Exchange Act Release No. 38961 (Aug. 22, 
1997), 62 FR 45895 (Aug. 29, 1997).
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    Because the fee increases are allocated equitably and do not 
discriminate between issuers, the Commission believes that the proposal 
is consistent with Sections 15A(b)(5) and 15A(b)(6) of the Act. 
Although one commenter has argued that the fee increases are excessive, 
the Commission notes that no other issuer expressed similar views. Even 
the single commenter indicated that there may be a suitable alternative 
to paying the increased fees (i.e., by listing on another marketplace).

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-NASD-97-83) be, and hereby, 
is approved.\9\

    \8\ 15 U.S.C. Sec. 78s(b)(2).
    \9\ In approving this rule, the Commission has considered the 
proposed rule's impact on efficiency, competition and capital 
formation. The proposed rule change should not have a materially 
adverse impact on the issuer listing process due to the robust 
competition among marketplaces to attract issuers. The net effect of 
approving the proposed rule change will be positive. 15 U.S.C. 
Sec. 78c(f).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-3278 Filed 2-9-98; 8:45 am]
BILLING CODE 8010-01-M