[Federal Register Volume 66, Number 234 (Wednesday, December 5, 2001)]
[Notices]
[Pages 63275-63277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30141]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45116; File No. SR-NASD-2001-84]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by National Association of Securities Dealers, Inc. To Change 
the Description of the Market Capitalization Listing Standard to Market 
Value of Listed Securities

November 28, 2001.
    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 November 14, 2001, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association'') through its subsidiary, The Nasdaq 
Stock Market, Inc. (``Nasdaq''), filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by Nasdaq. 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

    Nasdaq has filed with the Commission a proposed rule change to 
change the description of the market capitalization listing standard to 
market value of listed securities. Nasdaq is also proposing to provide 
a definition of the term ``listed securities'' in Nasdaq's Marketplace 
Rules. Proposed new language is in italics; proposed deletions are in 
brackets.
* * * * *

Rule 4200. Definitions

    (a) For purposes of the Rule 4000 Series, unless the context 
requires otherwise:
    (1)-(18) No change
    (19) ``Listed securities'' means securities quoted on Nasdaq or 
listed on a national securities exchange.
    Former (19)-(36) renumbered as (20)-(37)
    (b) No change

Rule 4310. Qualification Requirements for Domestic and Canadian 
Securities

    To qualify for inclusion in Nasdaq, a security of a domestic or 
Canadian issuer shall satisfy all applicable requirements contained in 
paragraphs (a) or (b), and (c) hereof.
    (a)-(b) No change
    (c) In addition to the requirements contained in paragraph (a) or 
(b) above, and unless otherwise indicated, a security shall satisfy the 
following criteria for inclusion in Nasdaq:
    (1) No change
    (2)(A) For initial inclusion, the issuer shall have:
    (i) No change
    (ii) market value of listed securities [market capitalization] of 
$50 million (currently traded issuers must meet this requirement and 
the bid price requirement under Rule 4310(c)(4) for 90 consecutive 
trading days prior to applying for listing); or
    (iii) No change
    (B) For continued inclusion, the issuer shall maintain:
    (i) No change
    (ii) market value of listed securities [market capitalization] of 
$35 million; or
    (iii) No change
    (3) For initial inclusion, the issuer shall have an operating 
history of at least one year or a market value of listed securities 
[market capitalization] of $50 million.
    (4)-(7) No change
    (8)(A) No change
    (B) No change
    (C) A failure to meet the continued inclusion requirements for 
market value of listed securities [market capitalization] shall be 
determined to exist only if the deficiency continues for a period of 10 
consecutive business days. Upon such failure, the issuers shall be 
notified promptly and shall have a period of 30 calendar days from such 
notification to achieve compliance with the applicable continued 
inclusion standard. Compliance can be achieved by meeting the 
applicable standard for a minimum of 10 consecutive business days 
during the 30 day compliance period.
    (9)-(29) No change
    (d) No change

Rule 4320. Qualification Requirements for Non-Canadian Foreign 
Securities and American Depositary Receipts

    To qualify for inclusion in Nasdaq, a security of a non-Canadian 
foreign issuer, an American Depositary Receipt (ADR) or similar 
security issued in respect of a security of a foreign issuer shall 
satisfy the requirements of paragraphs (a), (b) or (c), and (d) and (e) 
of this Rule.
    (a)-(d) No change
    (e) In addition to the requirements contained in paragraphs (a), 
(b) or (c), and (d), the security shall satisfy the following criteria 
for inclusion in Nasdaq:
    (1) No change
    (2)(A) For initial inclusion, the issuer shall have:
    (i) No change
    (ii) market value of listed securities [market capitalization] of 
U.S. $50 million (currently traded issuers must meet this requirement 
for 90 consecutive trading days prior to applying for listing); or
    (iii) No change
    (B) For continued inclusion, the issuer shall maintain:
    (i) No change
    (ii) market value of listed securities [market capitalization] of 
U.S. $35 million; or
    (iii) No change
    (C) No change
    (D) A failure to meet the continued inclusion requirements for 
market value of listed securities [market capitalization] shall be 
determined to exist only if the deficiency continues for a period of 10 
consecutive business days, Upon such failure, the issuer shall be 
notified promptly and shall have a period of 30 calendar days from such 
notification to achieve compliance with the applicable continued 
inclusion standard. Compliance can be achieved by meeting the 
applicable standard for a minimum of 10 consecutive business days 
during the 30 day compliance period.
    (E) No change
    (3)-(25) No change
    (f) No change

Rule 4420. Quantitative Designation Criteria

    In order to be designated for the Nasdaq National Market, an issuer 
shall

[[Page 63276]]

be required to substantially meet the criteria set forth in paragraphs 
(a), (b), (c), (d), (e), (f), or (g) below. Initial Public Offerings 
substantially meeting such criteria are eligible for immediate 
inclusion in the Nasdaq National Market upon prior application and with 
the written consent of the managing underwriter that immediate 
inclusion is desired. All other qualifying issues, excepting special 
situations, are included on the next inclusion date established by 
Nasdaq.
    (a)-(b) No change
    (c) Entry Standard 3
    An issuer designated under this paragraph does not also need to be 
in compliance with the quantitative criteria for initial inclusion in 
the Rule 4300 series.
    (1)-(5) No change
    (6) The issuer has:
    (A) a market value of listed securities [market capitalization] of 
$75 million (currently traded issuers must meet this requirement and 
the bid price requirement under Rule 4420(c)(3) for 90 consecutive 
trading days prior to applying for listing); or
    (B) No change
    (d)--(f) No change
    (g) Nasdaq will consider designating as Nasdaq National Market 
securities Selected Equity-linked Debt Securities (SEEDS) that 
generally meet the criteria of this paragraph (g). SEEDS are limited-
term, non-convertible debt securities of an issuer where the value of 
the debt is based, at least in part, on the value of another issuer's 
common stock or non-convertible preferred stock (or sponsored American 
Depositary Receipts (ADPs) overlying such equity securities).
    (1)-(2) No change
    (3) Minimum Standards Applicable to the Linked Security
    An equity security on which the value of the SEEDS is based must:
    (A)(i) have a market value of listed securities [market 
capitalization] of at least $3 billion and a trading volume in the 
United States of at least 2.5 million shares in the one-year period 
preceding the listing of the SEEDs;
    (ii) have a market value of listed securities [market 
capitalization] of at least $1.5 billion and trading volume in the 
United States of at least 10 million shares in the one-year period 
preceding the listing of the SEEDS; or
    (iii) have a market value of listed securities [market 
capitalization] of at least $500 million and a trading volume in the 
United States of at least 15 million shares in the one-year period 
preceding the listing of the SEEDS.
    (B)-(C) No change
    (4)-(5) No change
    (h) No change

Rule 4450. Quantitative Maintenance Criteria

    After designation as a Nasdaq National Market security, a security 
must substantially meet the criteria set forth in paragraphs (a) or 
(b), and (c), (d), (e), and (f) below to continue to be designated as a 
national market system security. A security maintaining its designation 
under paragraph (b) need not also be in compliance with the 
quantitative maintenance criteria in the Rule 4300 series.
    (a) No change
    (b) Maintenance Standard 2--Common stock, Preferred Stock, Shares 
or Certificates of Beneficial Interest of Trusts and Limited 
Partnership Interests in Foreign or Domestic Issues
    (1) The issuer has:
    (A) a market value of listed securities [market capitalization] of 
$50 million; or
    (B) No change
    (2)-(6) No change
    (c)-(g) 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, Nasdaq 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. Nasdaq 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 purpose of the proposed rule change is to amend the description 
of the market capitalization listing standard to market value of listed 
securities. One of the standards under which issuers can qualify for 
listing on The Nasdaq National Market (``National Market'') is to have 
a market capitalization of at least $75,000,000. Issuers may also 
qualify for continued inclusion on the National market with at least 
$50,000,000 in market capitalization. The minimum market capitalization 
standards for initial and continued inclusion on The Nasdaq SmallCap 
Market are $50,000,000 and $35,000,000, respectively.
    For purposes of initial listing eligibility, Nasdaq has 
historically interpreted the term market capitalization to include only 
the value of listed securities. In connection with continued listing 
eligibility, however, Nasdaq has also considered market capitalization 
to include classes of non-redeemable convertible preferred stock, 
provided that the conversion price was ``in the money.'' This approach 
has created uncertainty among issuers and investors as to the 
definition and application of the market capitalization listing 
standard. Furthermore, Nasdaq's Marketplace Rules do not define market 
capitalization and this term may be thought to include more than just 
the value of listed securities or non-redeemable convertible preferred 
stock that is in the money. For example, issuers and investors may 
believe that all unlisted convertible preferred stock or non-
convertible preferred stock may be included in the definition of market 
capitalization.
    As such, Nasdaq proposes to change the description of the market 
capitalization listing standard to market value of listed securities. 
In conjunction with this change, Nasdaq also proposes to add to 
Nasdaq's Marketplace Rules a definition of the term ``listed 
securities.'' Nasdaq believes that these modifications will clarify for 
issuers and investors that initial and continued listing eligibility 
will be based only upon the value of an issuer's securities that are 
quoted on Nasdaq or listed on a national securities exchange.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A(b)(6) of the Act \3\ in that the proposed 
rule change is designed to prevent fraudulent and manipulative acts and 
practices, and to protect investors and the public interest.
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    \3\ 15 U.S.C. 78o(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    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.

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.

[[Page 63277]]

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 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 File No. SR-NASD-2001-84 and 
should be submitted by December 26, 2001.


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-30141 Filed 12-4-01; 8:45 am]
BILLING CODE 8010-01-M