[Federal Register Volume 67, Number 16 (Thursday, January 24, 2002)]
[Notices]
[Pages 3520-3521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1703]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45283; File No. SR-NASD-2001-84]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Notice of Filing and Order Granting Accelerated Approval to 
Amendment No. 1 by the National Association of Securities Dealers, Inc. 
To Change the Description of the Market Capitalization Listing Standard 
to Market Value of Listed Securities

January 15, 2002.

I. Introduction

    On November 14, 2001, the National Association of Securities 
Dealers, Inc. (``NASD'' or ``Association'') through its subsidiary, The 
Nasdaq Stock Market, Inc. (``Nasdaq''), pursuant to section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change to modify 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register on December 5, 2001.\3\ The Commission received no comments on 
the proposal. On December 18, 2001, the Exchange submitted Amendment 
No. 1 to the proposed rule change.\4\
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    \3\ See Securities Exchange Act Release No. 45116 (November 28, 
2001), 66 FR 63275 (December 5, 2001).
    \4\ See Letter from John D. Nachmann, Senior Attorney, Nasdaq, 
to Katherine A. England, Assistant Director, Division of Market 
Regulation, Commission, dated December 17, 2001 (``Amendment No. 
1''). In Amendment No. 1, the Exchange requested that the proposed 
rule change become effective on June 1, 2002.
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II. Description

    The Exchange has proposed 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

[[Page 3521]]

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.'' According to 
Nasdaq, this approach has created uncertainty among issuers and 
investors as to the definition and application of the market 
capitalization listing standard. In addition, Nasdaq's Marketplace 
Rules do not define market capitalization and Nasdaq believes that 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.
    Accordingly, Nasdaq is amending the description of the market 
capitalization listing standard so that it is based on the market value 
of listed securities. In conjunction with this change, Nasdaq also is 
adding a definition of the term ``listed securities'' to Nasdaq's 
Marketplace Rules. 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.

III. Discussion

    After careful review, 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.\5\ In particular, the Commission believes that the 
proposal is consistent with the requirements of sections 15A(b)(6) of 
the Act,\6\ which requires, among other things, that the Association's 
rules are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, and, in 
general, to protect investors and the public interest.
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    \5\ In approving this rule proposal, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78o-3(b)(2) and (6).
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    The Commission believes that the rule change should clarify the 
standards under which issuers can qualify for listing on the National 
Market. In particular, the rule change should 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.

IV. Amendment No. 1

    The Commission finds good cause for approving Amendment No. 1 prior 
to the thirtieth day after the date of publication of notice thereof in 
the Federal Register. In Amendment No. 1, Nasdaq notified the 
Commission that in order to minimize the impact of the proposed rule 
change on existing issuers, the rule will go into effect on June 1, 
2002. The Commission believes that this is a suitable delay to allow 
issuers listed on the National Market to become informed of the rule 
change and prepare accordingly. Therefore, the Commission finds that 
granting accelerated approval to Amendment No. 1 is appropriate and 
consistent with section 19(b)(2) of the Act.\7\
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    \7\ 15 U.S.C. 78s(b)(2).
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V. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1, including whether it 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 February 14, 2002.

VI. Conclusion

    For all of the aforementioned reasons, 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 exchange.
    It Is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-NASD-2001-84) is approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-1703 Filed 1-23-02; 8:45 am]
BILLING CODE 8010-01-M