[Federal Register Volume 64, Number 218 (Friday, November 12, 1999)]
[Notices]
[Pages 61678-61680]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29601]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42108; File No. SR-NASD-99-40]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc., 
Revising Its Fees for Additional Shares

November 4, 1999.
    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 August 20, 1999, the National Association of Securities Dealers, 
Inc. (``NASD''), through its wholly owned subsidiary the Nasdaq Stock 
Market, Inc. (``Nasdaq''), filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the NASD. 
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 NASD proposes to revise the fees it charges Nasdaq National 
Market and Nasdaq SmallCap Market issuers for listing Additional 
Shares. Set forth below is the text affected by the proposed rule 
change. Proposed new language is in italic; proposed deletions are in 
brackets.
* * * * *

4510. The Nasdaq National Market

    (a) Entry Fee
    No change
    (b) Additional Shares
    (1) The issuer of each class of security[, other than the 
American Depositary Receipts,] that is a domestic issue which is 
listed in the Nasdaq National Market shall pay to The Nasdaq Stock 
Market, Inc. the fee set forth in subparagraph (2) below in 
connection with the issuance of additional shares of each class of 
listed security [set forth in subparagraph (3) below].
    (2) The fee in connection with additional shares shall be $2,000 
or [$.02] $.01 per additional share, whichever is higher, up to a 
maximum of $17,500 per [issuance] notification and an annual maximum 
of $35,000 per issuer.
    (3) [The fee in connection with additional shares is applicable 
to the following issuances of securities:
    (A) Acquisitions, mergers or consolidations;
    (B) Public offerings;
    (C) Rights and subscription offerings;

[[Page 61679]]

    (D) Exchange offers; and
    (E) Private placements.
    (4) Payment of the fee to The Nasdaq Stock Market, Inc. shall be 
included with] Calculation of the fee will be based on the issuer 
notification to Nasdaq of the issuance of additional shares of 
securities as required under provisions of Rule 4310(c)(17) [and 
Rule 4320(e)(15)].
    (c)-(d) No change

4520. The Nasdaq SmallCap Market

    (a) Entry Fee
    No change
    (b) Additional Shares
    (1) The issuer of each class of security [other than American 
Depositary Receipts] that is a domestic issue which is listed in The 
Nasdaq SmallCap Market shall pay to The Nasdaq Stock Market, Inc. 
the fee set forth in subparagraph (2) below in connection with the 
issuance of additional shares of each class of listed security [set 
forth in subparagraph (3) below].
    (2) The fee in connection with additional shares shall be 
[$1,000] $2,000 or $.01 per additional share, whichever is higher, 
up to a maximum of [$7,500] $17,500 per [issuance] notification and 
an annual maximum of $35,000 per issuer.
    (3) [The fee in connection with additional shares is applicable 
to the following issuances of securities:
    (A) Acquisitions, mergers or consolidations;
    (B) Public offerings;
    (C) Rights and subscription offerings;
    (D) Exchange offers; and
    (E) Private placements.
    (4) Payment of the fee to The Nasdaq Stock Market, Inc. shall be 
included with] Calculation of the fee will be based on issuer 
notification to the Association of the issuance of additional shares 
of securities as required under provisions of Rule 4310(c)(17) [and 
Rule 4320(e)(16)].
    (c)-(d) No change

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 NASD included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The NASD has prepared summaries, set forth in Sections 
(A), (B), and (C) below, of the most significant aspects of such 
statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The NASD proposes to revise the current fee schedule for 
``Additional Shares.'' Under the revised fee schedule, issuers would 
pay a flat fee of $0.01 per share for all issuances of Additional 
Share, subject to a cap of $17,500 per notification and $35,000 per 
year. Currently, Nasdaq National Market issuers pay a fee of $0.02 per 
share for all issuances, subject to a cap of $17,500 per issuance, and 
Nasdaq SmallCap Market issuers pay a fee of $0.01 per share for all 
issuances, subject to a cap of $7,500 per issuance. The current fees 
are charged only for the issuance of shares in certain transactions and 
are not subject to annual maximum caps. Under the proposal, the minimum 
fee per notification will be $2,000; Nasdaq SmallCap Market Issuers are 
currently subject to a minimum fee of $1,000 per issuance and Nasdaq 
National Market issuers to a minimum fee of $2,000 per issuance.
    The NASD believes that this revision of the fee schedule will 
better spread the costs of issuer-related initiatives across the base 
of issuers benefiting from such initiatives. Specifically, the revised 
fee structure recognizes that Nasdaq does not distinguish between 
National Market issuers and SmallCap Market issuers in providing 
educational initiatives, issuer service initiatives, or surveillance 
measures. Accordingly, the per-share fee for National market issuers 
has been reduced to that of SmallCap Market issuers and the minimum and 
maximum fees payable by Small Cap Market issuers have been increased to 
the levels paid by National Market issuers. Furthermore, the revised 
fee structure eliminate the old fee structure's artificial distinction 
between transactions eligible to be assessed fees. This distinction 
caused confusion for issuers and created difficulty for the NASD in its 
administration of the program for listing Additional Shares.
    The proposed fee structure also will allow issuers to file 
notifications of several issuances with the NASD on a single form and 
aggregate the fees assessed on those issuances toward the $17,500 
maximum fee per notification.\3\ Previously, issuers were required to 
file a separate notification with respect to every transaction that 
qualified as a fee-assessable listing of Additional Shares and each 
such transaction was subject to the maximum fee per issuance. Finally, 
the $35,000 annual cap limits the maximum fee an issuer would be 
subject to and ensures that no individual issuer would pay, as a result 
of frequent stock splits or capital raising transactions, a 
disproportionate share of the costs of initiatives provided by the 
Nasdaq to all National Market and SmallCap Market issuers.
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    \3\ Each issuance must still be filed no later than 15 days 
prior to issuance of the underlying shares, as required by NASD Rule 
4310(c)(17).
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2. Statutory Basis
    The Nasdaq believes that the proposed rule change is consistent 
with the provisions of Sections 15A(b)(5) and (6) \4\ of the Act. The 
proposed rule change is consistent with Section 15A(b)(5) as it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers using the Nasdaq system. Fees 
for listing Additional Shares were first put in place at the Nasdaq in 
1993.\5\ At the time, the NASD indicated that the fees would be used to 
fund issuer-related operations, including educational initiatives, 
issuer service initiatives, and NASD surveillance measures to enhance 
the quality of the Nasdaq Stock Market.\6\ Since 1993, expenditures for 
these initiatives have increased substantially, but funding recouped 
through the assessment of fees for listing Additional Shares has not 
increased proportionately. The proposed rule change is consistent with 
Section 15A(b)(6) as it is designed to promote just and equitable 
principles of trade and does not permit unfair discrimination between 
customers, issuers, brokers, or dealers. As noted above, the fee 
revision reflects the increased costs incurred by Nasdaq with respect 
to issuer-related initiatives.
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    \4\ 15 U.S.C. 78o-3(b) (5) and (6).
    \5\ See Securities Exchange Act Release No. 31586 (December 11, 
1992), 57 FR 60247 (December 18, 1992).
    \6\ Id.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Nasdaq does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory

[[Page 61680]]

organization consents, the Commission will:
    A. By order approve 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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 inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to the file number in the caption 
above and should be submitted by December 3, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-29601 Filed 11-10-99; 8:45 am]
BILLING CODE 8010-01-M