[Federal Register Volume 68, Number 4 (Tuesday, January 7, 2003)]
[Notices]
[Pages 822-824]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-222]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47111; File No. SR-NASD-2002-183]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change and Amendment 
Nos. 1 and 2 Thereto by the National Association of Securities Dealers, 
Inc. Amending Nasdaq's Rules Pertaining to Certain Issuer Entry Fees

December 31, 2002.
    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 December 26, 2002, the National Association of Securities Dealers, 
Inc. (``NASD''), through its 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 Nasdaq. On December 
30, 2002, Nasdaq filed Amendment No. 1 to the proposed rule change.\3\ 
On December 31, 2002 Nasdaq filed Amendment No. 2 to the proposed rule 
change.\4\ The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons and to approve the 
proposed rule change, as amended, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from John D. Nachmann, Senior Attorney, Nasdaq, 
to Katherine A. England, Assistant Director, Division of Market 
Regulation (``Division''), Commission (``Amendment No. 1''). In 
Amendment No. 1, Nasdaq requests that the Commission finds good 
cause to approve the proposed rule change on an accelerated basis 
pursuant to Section 19(b)(2) of the Act. 15 U.S.C. 78s(b)(2).
    \4\ See letter from John D. Nachmann, Senior Attorney, Nasdaq, 
to Katherine A. England, Assistant Director, Division, Commission, 
dated December 30, 2002 (``Amendment No. 2''). Amendment No. 2 makes 
technical changes to the proposed rule text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is proposing to amend its rules regarding non-refundable 
application fees, listing fees for rights, and SmallCap entry and 
annual listing fees. Below is the text of the proposed rule change. 
Proposed new language is italicized; proposed deletions are in 
brackets.
* * * * *
    4510. The Nasdaq National Market
    (a) Entry Fee
    (1) [When a] A domestic issuer, or foreign issuer raising capital 
in conjunction with its Nasdaq listing, that submits an application for 
inclusion of any class of its securities (not otherwise identified in 
this Rule 4500 series) in The Nasdaq National Market, [it] shall pay to 
The Nasdaq Stock Market, Inc. a fee calculated on total shares 
outstanding, [which includes a one-time company listing fee of $5,000 
($1,000 of which is a non-refundable processing fee),] according to the 
following schedule[:]. This fee will be assessed on the date of entry 
in The Nasdaq National Market, except for $5,000 which represents a 
non-refundable, application fee, and which must be submitted with the 
issuer's application.
    Up to 30 million shares--$100,000.
    30+ to 50 million shares--$125,000.
    Over 50 million shares--$150,000.
    (2) [When a] A foreign issuer not raising capital in conjunction 
with its Nasdaq listing, including American Depositary Receipts (ADRs), 
that submits an application for inclusion of any class of its 
securities (not otherwise identified in this Rule 4500 series) in The 
Nasdaq National Market, [it] shall pay to The Nasdaq Stock Market, Inc. 
a fee calculated on total shares outstanding, [which includes a one-
time company listing fee of $5,000 ($1,000 of which is a non-refundable 
processing fee),] according to the following schedule[:]. This fee will 
be assessed on the date of entry in The Nasdaq National Market, except 
for $5,000, which represents a non-refundable, application fee, and 
which must be submitted with the issuer's application.
    Up to 3 million shares--$50,000.
    3+ to 5 million shares--$75,000.
    5+ to 30 million shares--$100,000.
    30+ to 50 million shares--$125,000.
    Over 50 million shares--$150,000.
    (3) No change
    (4) An issuer that submits an application for inclusion of any 
class of rights in The Nasdaq National Market, shall pay, at the time 
of its application, a non-refundable application fee of $1,000 to The 
Nasdaq Stock Market, Inc.
    ([4]5) The Board of Directors of The Nasdaq Stock Market, Inc. or 
its designee may, in its discretion, defer or waive all or any part of 
the entry fee prescribed herein.
    ([5]6) If the application is withdrawn or is not approved, the 
entry fee (less the non-refundable application [processing] fee) shall 
be refunded.
    (b)-(d) No change
    4520. The Nasdaq SmallCap Market
    (a) Entry Fee
    (1) [When a]An issuer that submits an application for inclusion of 
any class of its securities (not otherwise identified in this Rule 4500 
series) [, other than convertible debentures,] in The Nasdaq SmallCap 
Market, [it] shall pay to The Nasdaq Stock Market, Inc. a fee 
calculated on total shares outstanding, [which includes a one-time 
company listing fee of $5,000 ($1,000 of which is a non-refundable 
processing fee),] according to the following schedule[:]. This fee will 
be assessed on the date of entry in The Nasdaq SmallCap Market, except 
for a non-refundable, application fee of $5,000, which must be 
submitted with the issuer's application.
    Up to [1 million shares--$9,500.
    1+ to] 5 million shares--$[19,000] 25,000.
    5+ to 10 million shares--$[30,875] 35,000.
    10+ to 15 million shares--$[40,375] 45,000.
    Over 15 million shares--$[47,500] 50,000.
    (2) [When a]An issuer that submits an application for inclusion of 
any class of convertible debentures in The Nasdaq SmallCap Market, [it] 
shall pay to The Nasdaq Stock Market, Inc. a [one-time, company] non-
refundable application [listing] fee of $5,000 [(which shall include a 
$1,000 non-refundable processing fee)] and a fee of $1,000 or $50 per 
million dollars face amount of debentures outstanding, whichever is 
higher.
    (3) The Board of Directors of The Nasdaq Stock Market, Inc. or its 
designee may, in its discretion, defer or waive all or any part of the 
entry fee prescribed herein.
    (4) Total shares outstanding means the aggregate of all classes of 
equity securities to be included in The Nasdaq SmallCap Market as shown 
in the issuer's most recent periodic report or in more recent 
information held by Nasdaq or, in the case of new issues, as shown in 
the offering circular, required to be

[[Page 823]]

filed with the issuer's appropriate regulatory authority.
    (5) An issuer that submits an application for inclusion of any 
class of rights in The Nasdaq SmallCap Market, shall pay, at the time 
of its application, a non-refundable application fee to The Nasdaq 
Stock Market of $1,000. [If the application is withdrawn or is not 
approved, the entry fee (less the non-refundable application 
[processing] fee) shall be refunded.]
    (b) No change
    (c) Annual Fee
    (1) The issuer of a class of securities that is a domestic or 
foreign issue, including American Depositary Receipts (ADRs), listed in 
The Nasdaq SmallCap Market shall pay to The Nasdaq Stock Market, Inc. 
an annual fee to be computed as follows:
    (A) $[8,000] 15,000 for the first issue if it has total shares 
outstanding of up to 10 million shares; or
    (B) $16,000 for the first issue if it has total shares outstanding 
of 10 million or more shares; plus
    (C) $2,000 for each additional issue.
    (D) For companies with more than one issue, the first issue is the 
company's common stock or common stock equivalent with the highest 
total shares outstanding. For companies with no common stock or common 
stock equivalent, the first issue is the issue with the highest total 
shares outstanding.
    (2)-(4) 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 III 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 Nasdaq rules 
regarding non-refundable application fees, listing fees for rights, and 
SmallCap entry and annual listing fees. Nasdaq proposes that these 
changes be effective as of January 1, 2003. Nasdaq also proposes that 
the proposed fees be applied to all issuers listed as of that date, and 
all new listings entering Nasdaq on or after that date. Pursuant to 
NASD Rule 4520 (``The Nasdaq SmallCap Market''), SmallCap entry fees 
would increase from a range of $9,500 to $47,000, to a range of $25,000 
to $50,000, depending on the total shares outstanding in the issue. 
Nasdaq SmallCap annual fees would increase from $8,000 for the first 
issue, to a range from $15,000 to $16,000, depending on the total 
shares outstanding in the issue. Nasdaq is undertaking this increase to 
cover costs associated with the operation of the SmallCap market. In 
particular, Nasdaq has continued to invest in market services and 
initiatives such as the launch of SuperMontageSM, the NASDAQ 
Market Intelligence DeskSM, and enhancements to NASDAQ.com. 
At the same time, Nasdaq's costs to provide regulatory oversight, 
client coverage and other professional services have continued to 
increase.
    Nasdaq also proposes to: (1) Provide transparency to the entry fee 
for rights; (2) change the date of the assessment of entry fees from 
the date of application to the date of listing; and (3) increase the 
non-refundable portion of the listing fee from $1,000 to $5,000 for 
both the Nasdaq National Market and the Nasdaq SmallCap Market.\5\
    With respect to the entry fee for rights, Nasdaq rules do not 
currently distinguish between rights and regular equities. As such, 
applications for the inclusion of any class of rights are subject to 
the same entry fees as those for regular equities. Nasdaq has 
traditionally waived all but $1,000 of the entry fees for rights 
because Nasdaq believes that it would be inequitable to charge the same 
entry fees for rights and regular equities, as rights are short-term in 
nature and usually expire in 30 to 60 days. Therefore, Nasdaq is 
proposing to codify a separate non-refundable entry fee of $1,000 for 
the inclusion of any class of rights to provide transparency to this 
policy.
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    \5\ See NASD Rules 4510 and 4520, respectively.
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    Nasdaq is also proposing to revise the assessment date for entry 
fees from the date that an issuer submits a listing application to the 
date that an issuer is listed. Currently, Nasdaq currently assesses 
entry fees based on the date that an issuer submits its application. 
Because an issuer is billed for entry fees at the time that it is 
listed, however, Nasdaq staff must review the fee schedule that was in 
effect at the time that the issuer submitted its listing application in 
order to determine the appropriate entry fees that are due. Nasdaq 
believes that revising the assessment date for entry fees to the date 
that an issuer is listed will make it much easier for Nasdaq staff, as 
well as issuers, to determine the proper fees for the listing of a 
class of securities; as the fees will be determined by the fee schedule 
in effect at the time of billing.
    Lastly, Nasdaq proposes to increase the non-refundable portion of 
the listing fee from $1,000 to $5,000. Currently, when an issuer 
submits an application for inclusion on Nasdaq, it must pay a one-time 
fee of $5,000, which includes a $1,000 non-refundable processing fee. 
Nasdaq is proposing to increase the non-refundable processing fee from 
$1,000 to $5,000 in order to cover the costs associated with processing 
an application. Because the cost of processing a listing application is 
approximately $5,000, Nasdaq is unable to cover its costs in those 
situations where an issuer withdraws its application or is denied 
listing. In conjunction with this change, Nasdaq also proposes to 
change the term ``listing fee'' to ``application fee.''
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act \6\ in general, and with 
sections 15A(b)(5)\7\ and 15A(b)(6)\8\ of the Act in particular. Nasdaq 
believes that the proposed rule change is consistent with Section 
15A(b)(5) of the Act in that it provides for the equitable allocation 
of reasonable dues, fees, and other charges among issuers using the 
Nasdaq system. Nasdaq believes that the proposed rule change is 
consistent with section 15A(b)(6) of the Act in that it is designed to 
prevent fraudulent and manipulative acts and practices as well as to 
protect investors and the public interest by providing greater 
transparency to Nasdaq's rules for issuers, their counsel, and 
investors.

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.

[[Page 824]]

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. 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-2002-183 and 
should be submitted by January 28, 2003.

IV. Commission's Finding and Order Granting Accelerated Approval of a 
Proposed Rule Change

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of section 15A of the Act 
\9\ and the rules and regulations thereunder applicable to a national 
securities association. Specifically, the Commission finds that the 
proposed rule change, as amended, is consistent with section 15A(b)(5) 
of the Act,\10\ in that the proposal provides for an equitable 
allocation of reasonable dues, fees, and other charges among issuers 
using Nasdaq's facility and/or systems. As represented by Nasdaq, the 
Commission notes that the proposed fee increase in Nasdaq SmallCap 
entry and annual fees reflect the additional costs associated with 
operating Nasdaq SmallCap market, including various regulatory and 
client services provided to issuers. Namely, Nasdaq represented that it 
has continued to invest in market services and market quality 
improvements such as SuperMontage, the Nasdaq Market Intelligence Desk, 
and enhancements to NASDAQ.com. Furthermore, as represented by Nasdaq, 
the increase of a non-refundable application fee from $1,000 to $5,000 
covers the processing of an issuer application for entry, especially in 
those instances where an issuer has withdrawn its application or has 
been denied listing.
    The Commission also finds that the proposed rule change consistent 
with section 15A(b)(6) of the Act \11\ because the proposed rules 
promote just and equitable principles of trade, and protect investors 
and the public interest. In particular, the Commission notes that 
Nasdaq should provide greater transparency to issuers by codifying its 
regular practice of charging a $1,000 fee for the inclusion of any 
class of rights. Finally, Nasdaq has represented that it would assess 
appropriate entry fees based on the fee schedule in effect at the time 
of listing, rather than the application date.
    Nasdaq seeks to implement that proposed fees on January 1, 2003. In 
order to facilitate the implementation of the new fee schedule and ease 
administration of the fees, Nasdaq has requested that the Commission 
find good cause to approve the proposed rule change, as amended, before 
the thirtieth day after the date of publication of notice in the 
Federal Register. The Commission finds good cause to approve the 
proposed rule change, as amended, prior to the thirtieth day after 
publication in the Federal Register. The Commission believes that 
granting accelerated approval to the amended proposal will allow Nasdaq 
to implement the new fees by January 1, 2003 and will provide issuers 
with notice and an opportunity to budget for additional costs.

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the propsed rule change (SR-NASD-2002-183) is approved on 
an accelerated basis.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
Jill M. Peterson,
Assistant Secretary.
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    \6\ 15 U.S.C. 78o-3.
    \7\ 15 U.S.C. 78o-3(b)(5).
    \8\ 15 U.S.C. 78o-3(b)(6).
    \9\ 15 U.S.C. 78o-3.
    \10\ 15 U.S.C. 78o-3(b)(5).
    \11\ 15 U.S.C. 78o-3(b)(6).
    \12\ 15 U.S.C. 78s(b)(2).
    \13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 03-222 Filed 1-6-03; 8:45 am]
BILLING CODE 8010-01-P