[Federal Register Volume 69, Number 232 (Friday, December 3, 2004)]
[Notices]
[Pages 70296-70299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3451]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50741; File No. SR-NASD-2004-142]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment 
No. 1 Thereto To Establish Fees for Companies With a Dual Listing on 
the New York Stock Exchange and Nasdaq

November 29, 2004.
    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 September 28, 2004, 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 November 
12, 2004, Nasdaq amended the proposed rule change.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Amendment No. 1 replaced and superseded the original 
filing in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to adopt a fee schedule for issuers that are dually 
listed on the New York Stock Exchange (the ``NYSE'') and Nasdaq. Should 
the Commission approve the proposed rule change, Nasdaq will implement 
the proposed rule change immediately.

[[Page 70297]]

    The text of the proposed rule change is below. Proposed new 
language is in italics.\4\
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    \4\ Changes are marked to the rule text that appears in the 
electronic NASD Manual found at www.nasd.com. Nasdaq notes, however, 
that it has recently submitted SR-NASD-2004-140 (September 20, 
2004), a proposed rule change that would adopt Rules 4510(a)(6) and 
4520(a)(6). Accordingly, those provisions have been marked as 
``Reserved'' in the rule text. See Securities Exchange Act Release 
No. 50740, November 29, 2004.
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4510. The Nasdaq National Market

(a) Entry Fee
    (1)-(5) No change.
    (6) Reserved.
    (7) The fees described in this Rule 4510(a) shall not be applicable 
to an issuer (i) whose securities are listed on the New York Stock 
Exchange and designated as national market securities pursuant to the 
plan governing New York Stock Exchange securities at the time such 
securities are approved for listing on Nasdaq, and (ii) that maintains 
such listing and designation after it lists such securities on Nasdaq.
(b) Additional Shares
    (1)-(4) No change.
    (5) The fees described in this Rule 4510(b) shall not be applicable 
to an issuer (i) whose securities are listed on the New York Stock 
Exchange and designated as national market securities pursuant to the 
plan governing New York Stock Exchange securities at the time such 
securities are approved for listing on Nasdaq, and (ii) that maintains 
such listing and designation after it lists such securities on Nasdaq.
(c) Annual Fee--Domestic and Foreign Issues
    (1)-(4) No change.
    (5) In lieu of the fees described in Rule 4510(c)(1), the annual 
fee shall be $15,000 for each issuer (i) whose securities are listed on 
the New York Stock Exchange and designated as national market 
securities pursuant to the plan governing New York Stock Exchange 
securities at the time such securities are approved for listing on 
Nasdaq, and (ii) that maintains such listing and designation after it 
lists such securities on Nasdaq. Such annual fee shall be assessed on 
the first anniversary of the issuer's listing on Nasdaq.
    (d)-(e) No change.

4520. The Nasdaq SmallCap Market

(a) Entry Fee
    (1)-(5) No change.
    (6) Reserved.
    (7) The fees described in this Rule 4520(a) shall not be applicable 
to an issuer (i) whose securities are listed on the New York Stock 
Exchange and designated as national market securities pursuant to the 
plan governing New York Stock Exchange securities at the time such 
securities are approved for listing on Nasdaq, and (ii) that maintains 
such listing and designation after it lists such securities on Nasdaq.
(b) Additional Shares
    (1)-(4) No change.
    (5) The fees described in this Rule 4520(b) shall not be applicable 
to an issuer (i) whose securities are listed on the New York Stock 
Exchange and designated as national market securities pursuant to the 
plan governing New York Stock Exchange securities at the time such 
securities are approved for listing on Nasdaq, and (ii) that maintains 
such listing and designation after it lists such securities on Nasdaq.
(c) Annual Fee
    (1)-(4) No change.
    (5) In lieu of the fees described in Rule 4510(c)(1), the annual 
fee shall be $15,000 for each issuer (i) whose securities are listed on 
the New York Stock Exchange and designated as national market 
securities pursuant to the plan governing New York Stock Exchange 
securities at the time such securities are approved for listing on 
Nasdaq, and (ii) that maintains such listing and designation after it 
lists such securities on Nasdaq. Such annual fee shall be assessed on 
the first anniversary of the issuer's listing on Nasdaq.
(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, 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
    During 2004, following the repeal of the NYSE's Rule 500,\5\ Nasdaq 
established a dual listing program for securities listed on the NYSE. 
Nasdaq had long advocated the repeal of NYSE Rule 500, in favor of a 
competitive environment in which significant barriers to listing 
transfers do not exist and listed companies can move quickly and easily 
to the market that best suits their needs. In recognition of the fact 
that a change in listing venue is a major step for any issuer, however, 
Nasdaq's dual listing program is designed to allow issuers to undertake 
a focused comparison of the services and market quality offered by 
Nasdaq and the NYSE. The explicit goal of the program, however, is to 
encourage the eventual switch of companies that dual list.
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    \5\ See Securities Exchange Act Release No. 48720 (October 30, 
2003), 68 FR 62645 (November 5, 2003) (SR-NYSE-2003-23).
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    To facilitate the program, Nasdaq filed with the Commission on 
January 12, 2004, an interpretation of its rules (NASD IM-4500-3) that 
waived, for a one-year period, the entry fees, annual fees, and listing 
of additional shares fees due under Nasdaq rules for any NYSE issuer 
that dually listed on Nasdaq, or switched to Nasdaq, between January 
12, 2004, and December 31, 2004.\6\ With the instant proposed rule 
change, Nasdaq now proposes to establish a fee schedule for those NYSE 
issuers that remain dually listed after that one-year period, and for 
NYSE issuers that dually list after December 31, 2004. Nasdaq proposes 
to apply this schedule to any issuer that adds a dual listing on Nasdaq 
while remaining listed on the NYSE.
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    \6\ Securities Exchange Act Release No. 49286 (February 19, 
2004), 69 FR 8999 (February 26, 2004) (SR-NASD-2004-04).
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    Under the proposed fee schedule, the issuer of a dually listed 
security would not be subject to entry and application fees, which 
otherwise would range from $25,000 to $50,000 on The Nasdaq SmallCap 
Market and from $100,000 to $150,000 on the Nasdaq National Market. 
These issuers also would not be subject to the fee for listing 
additional shares, which is otherwise $2,500 or $0.01 per additional 
share, whichever is higher, up to an annual maximum of $45,000 per 
issuer.\7\ Finally, a dually listed issuer would not pay an annual fee 
until the end of its first year on Nasdaq, at which time the annual fee

[[Page 70298]]

would be $15,000.\8\ Nasdaq believes that without a remission of these 
fees, companies that may be interested in comparing Nasdaq and the NYSE 
through a dual listing would nevertheless be forced to weigh the 
potential benefits against a requirement to duplicate the fees that 
they have paid and continue to pay to the NYSE. Nasdaq believes that in 
effect, NYSE Rule 500 would have been replaced with a burden on a 
Nasdaq listing imposed by Nasdaq itself. Nasdaq believes that by 
promoting a comparison of markets through dual listing, a waiver of 
these fees will enhance fair competition between exchange markets and 
markets other than exchange markets, consistent with section 
11A(a)(1)(C)(ii) of the Act,\9\ to the benefit of the investing public.
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    \7\ Issuances of up to 49,999 additional shares per quarter are 
not subject to the Additional Shares fee.
    \8\ On August 25, 2004, Nasdaq proposed to modify the annual fee 
for issuers listed on the Nasdaq Stock Market. See Securities 
Exchange Act Release No. 50577 (October 21, 2004), 69 FR 62926 
(October 28, 2004) (SR-NASD-2004-128). Under this proposal, annual 
fees for SmallCap Market issuers would range from $17,500 to $21,000 
and annual fees for National Market issuers would range from $24,500 
to $75,000. Nasdaq has proposed that these revised fees be effective 
January 1, 2005 for issuers currently listed on The Nasdaq Stock 
Market.
    \9\ 15 U.S.C. 78k-1(a)(1)(C)(ii).
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    Nasdaq also believes that the proposed remission of the entry fee 
is justified from the standpoint of Nasdaq's experience with regard to 
the time and effort required to review applications of issuers that are 
already listed on an exchange. Although companies that dually list are 
reviewed for compliance with Nasdaq listing standards in the same 
manner as any other company applying for listing on Nasdaq, Nasdaq 
believes that the average application of a dually listing issuer is 
less likely to involve time-consuming regulatory issues than the 
average application from a company conducting an initial public 
offering or transferring from the over-the-counter market. This is, in 
part, due to the ongoing scheme of regulation to which such issuers 
have been subject. Moreover, because such companies are already 
familiar with the standards of conduct imposed upon public companies by 
listing markets, their applications are generally presented with a high 
degree of completeness and accuracy. Finally, and most significant, 
because such companies already satisfy the listing standards of the 
NYSE, there is a very high likelihood that they also comply with 
Nasdaq's listing standards. Thus, although Nasdaq always conducts a 
full and independent review of each issuer's compliance, and will 
continue to do so with respect to issuers that dually list, the 
probability that an issuer seeking to dually list will be found not in 
compliance and therefore denied access to a Nasdaq listing is low. As a 
result, the probability that Nasdaq staff will be required to devote 
time and effort to establish a sufficient record to support a decision 
to deny listing and to defend such a denial against appeal under the 
Rule 4800 Series is also low. By contrast, when an applicant is denied 
a listing, Nasdaq receives only a $5,000 application fee, but must 
frequently devote significant resources to defending its decision.
    The proposed fee schedule would require an issuer of dually listed 
securities to pay an annual listing fee of $15,000, instead of the 
annual fee otherwise due. In the case of an issuer that was eligible 
for a waiver under NASD IM-4500-3, this annual fee will be assessed on 
the anniversary of the issuer's Nasdaq listing. In the case of 
subsequent issuers that add a dual listing, the fee will be assessed on 
the anniversary of the issuer's listing on Nasdaq. Accordingly, issuers 
that opt to dual list will have a one-year period to assess the 
benefits of the dual listing before the fee is assessed.
    Although, as noted above, the goal of the dual-listing program is 
to encourage switches to Nasdaq after one year, some issuers may feel 
that they need more than one year to evaluate the two markets, or that 
they benefit from maintaining a dual listing that encourages ongoing 
competition between Nasdaq and the NYSE. In that case, Nasdaq believes 
it would be inequitable to charge dually listed issuers the full annual 
fee or the fee for listing additional shares, as they are also paying 
these fees to the NYSE. Nevertheless, Nasdaq believes that in such 
circumstances, the collection of a reduced annual fee is warranted to 
support the ongoing cost of issuer services, including regulatory 
oversight, and to fund future product and service investments.
    Nasdaq believes that imposing lower fees on dually listed issuers 
is equitable in light of the issuers' ongoing payment of fees to the 
NYSE and the ongoing role of the NYSE as the primary market for such 
issuers. Nasdaq's fee schedule and the fee schedules of other self-
regulatory organizations assess varying levels of fees on issuers based 
on reasoned assessments of the issuers' varying circumstances.\10\ For 
example, both entry fees and annual fees are assessed on a sliding 
scale that uses total shares outstanding and the issuer's market tier 
(i.e., Nasdaq National Market or SmallCap Market) as a corollary to the 
complexity of reviewing each issuer's compliance with listing standards 
and each issuer's ability to pay. Inevitably, the use of such a scale 
means that different issuers pay different amounts for their listing on 
Nasdaq. Similarly, non-U.S. issuers listing American Depositary 
Receipts (``ADRs'') on Nasdaq are subject to a lower annual fee than 
domestic issuers due, in part, to the fact that Nasdaq is typically a 
secondary market for these issuers' securities. Nasdaq believes that 
the lower fees for ADRs are directly analogous to the proposed lower 
fees for dually listed companies. Moreover, Nasdaq notes that certain 
functions required to oversee companies that are solely listed on 
Nasdaq are not necessary with respect to dually listed issuers. 
Specifically, Nasdaq's Market Watch group, which ordinarily reviews 
news releases for material news and makes determinations as to whether 
to halt trading pending news dissemination, defers to the NYSE on those 
matters regarding dually listed issuers. In addition, notifications for 
dividends and stock splits, or changes to the underlying security or 
symbol, are not required to be provided to Nasdaq as they would be in 
the case of issuers that are not dually listed. Finally, Nasdaq 
believes issuers that become dually listed voluntarily undertake a 
second set of regulations and therefore demonstrate their commitment to 
regulatory excellence. Although Nasdaq subjects dually listed companies 
to the same degree of regulatory scrutiny applicable to solely listed 
issuers, Nasdaq expects that companies of this type will raise fewer 
regulatory issues and therefore will require less staff time on an 
ongoing basis.
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    \10\ Nasdaq notes that the Commission has previously approved 
reduced fees for securities that are dually listed on the Pacific 
Exchange, finding that ``reduced fees are appropriate and reasonable 
because the costs incident to maintaining exclusive issues are 
greater than costs incident to maintaining dually listed issues.'' 
See Securities Exchange Act Release No. 40395 (September 3, 1998), 
63 FR 48774 (September 11, 1998) (SR-PCX-98-32).
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    It should also be noted that the trading of dually listed stocks 
remains subject to the restrictions of the Intermarket Trading System 
plan. Moreover, dually listed issuers are not eligible for inclusion in 
indices maintained by Nasdaq, and their stock is therefore not held by 
index products and funds based upon such indices.
    Nasdaq does not expect the financial impact of this proposed rule 
change to be material, either in terms of increased levels of annual 
fees from dually listed companies that eventually switch to Nasdaq or 
in terms of diminished entry or annual fees of companies that

[[Page 70299]]

maintain a dual listing. Quite simply, even with the proposed rule 
change in place, Nasdaq understands that a change in listing venue, 
either through a switch or a dual listing, is a major step for an 
issuer, and therefore Nasdaq does not expect that the number of dually 
listed issuers in a given time frame will be sufficient to have a 
material effect on financial resources. Accordingly, the proposed rule 
change will not impact Nasdaq's resource commitment to its regulatory 
oversight of the listing process or its regulatory programs.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\11\ in general, and with 
sections 15A(b)(5) and 15A(b)(6) of the Act,\12\ in particular, in that 
it is designed to provide an equitable allocation of reasonable dues, 
fees, and other charges among members and issuers and other persons 
using any facility or system which the NASD operates or controls, and 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system. As discussed above, Nasdaq 
believes that this proposal is an equitable allocation of reasonable 
fees because dually listed companies would pay annual fees, but such 
fees would be reduced in recognition of the fact that the issuer is 
also paying listing fees to another market and that certain services 
offered by Nasdaq would be duplicative of services already received 
from the other market. In addition, as noted above, Nasdaq believes 
that the proposed rule change is consistent with the provisions of 
section 11A(a)(1)(C)(ii) of the Act \13\ in that it is designed to 
promote fair competition between exchange markets and markets other 
than exchange markets.
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    \11\ 15 U.S.C. 78o-3.
    \12\ 15 U.S.C. 78o-3(b)(5) and (6).
    \13\ 15 U.S.C. 78k-1(a)(1)(C)(ii).
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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, as amended. Specifically, 
Nasdaq believes that the proposed rule change will enhance competition 
by allowing issuers that are listed on the NYSE to add a listing on 
Nasdaq without being required to pay fees that are duplicative of fees 
already paid to the NYSE.

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 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, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NASD-2004-142 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NASD-2004-142. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
NASD. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NASD-2004-142 and should be submitted on or before December 27, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-3451 Filed 12-2-04; 8:45 am]
BILLING CODE 8010-01-P