[Federal Register Volume 81, Number 84 (Monday, May 2, 2016)]
[Notices]
[Pages 26275-26277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-10147]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77706; File No. SR-NASDAQ-2016-059]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Require an Issuer of Securities Listed Under the Rule 5700 Series To 
Notify Nasdaq About the Replacement of the Index, Portfolio, or 
Reference Asset Underlying the Security and Pay a Fee in Connection 
With the Change

April 26, 2016.
    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 April 20, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II, below, which Items have been prepared by the Exchange. 
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 Exchange proposes to require that an issuer of securities 
listed under the Rule 5700 Series notify Nasdaq about the replacement 
of the index, portfolio, or reference asset underlying the security and 
pay a fee in connection with the change.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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 Exchange 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 Exchange 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
    Nasdaq rules require issuers to notify Nasdaq about substitution 
listing events and impose fees associated with those notifications. 
Specifically, Rule 5005(a)(40) defines a ``Substitution Listing Event'' 
as certain changes in the equity or legal structure of a company \3\ 
and Rule 5250(e)(4) requires a listed company to provide notification 
to Nasdaq about these events no later than 15 days before 
implementation of the event. These events generally require Nasdaq to 
review the entity for compliance with the applicable listing 
requirements.
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    \3\ A ``Substitution Listing Event'' means: A reverse stock 
split, re-incorporation or a change in the Company's place of 
organization, the formation of a holding company that replaces a 
listed Company, reclassification or exchange of a Company's listed 
shares for another security, the listing of a new class of 
securities in substitution for a previously-listed class of 
securities, a business combination described in IM-5101-2 (unless 
the transaction was publicly announced in a press release or Form 8-
K prior to October 15, 2013), or any technical change whereby the 
Shareholders of the original Company receive a share-for-share 
interest in the new Company without any change in their equity 
position or rights. See Rule 5005(a)(40).
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    Nasdaq proposes to expand the definition of a Substitution Listing 
Event to include cases where an issuer of securities listed under the 
Rule 5700 Series replaces, or significantly modifies, the index, 
portfolio, or reference asset underlying its security (including, but 
not limited to, a significant modification to the index methodology, a 
change in the index provider, or a change in control of the index 
provider). This type of change requires that Nasdaq review the changes 
to the index, portfolio, or reference asset for compliance with the 
applicable listing requirements and may require Nasdaq to make a rule 
filing with the Commission to continue listing the product with the 
revised index, portfolio, or reference asset.\4\
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    \4\ Other types of changes may also require Nasdaq to make a 
rule filing with the Commission to continue listing the changed 
product.
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    Nasdaq believes it is appropriate to require notification of these 
changes in the same manner as other Substitution Listing Events,\5\ 
which will increase to 15 days the time available to Nasdaq to conduct 
its initial review of the revised index, portfolio, or reference asset 
underlying the security, evaluate compliance with the listing 
requirements, and determine if a rule filing is required.\6\
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    \5\ Listed companies provide notification of a Substitution 
Listing Event via Nasdaq's Listing Center on the Company Event 
Notification Form.
    \6\ Currently, at a minimum, Nasdaq believes that an issuer must 
disclose such changes under Rule 5250(b)(1), which requires public 
disclosure of any material information that would reasonably be 
expected to affect the value of its securities or influence 
investors' decisions, and must notify Nasdaq's MarketWatch 
department 10 minutes prior to such announcement.
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    Nasdaq also proposes to modify Rule 5701 to highlight that a change 
to the index, portfolio, or reference asset underlying a security is a 
Substitution Listing Event that requires 15 calendar days' notice. The 
new language also emphasizes that such a change may affect the 
company's compliance with the listing requirements and may require 
Nasdaq to file a new rule filing pursuant to Section 19(b)(1) of the 
Act \7\ and for such rule filing to be approved by the SEC or otherwise 
take effect (as applicable), before the product can be listed or 
traded. The new rule language also indicates that Nasdaq will halt 
trading if a company effectuates a change that requires such a filing 
before it is approved by the SEC or otherwise takes effect (as 
applicable). The new rule language would also indicate that Nasdaq will 
commence delisting proceedings if a company effectuates a change in the 
case where Nasdaq determines not to submit a rule filing or withdraws a 
rule filing, or where the SEC disapproves a rule filing.\8\
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    \7\ 15 U.S.C. 78s(b)(1).
    \8\ The proposed rule change would also add language to Rule 
5701 to encourage companies to consult with Nasdaq staff 
sufficiently in advance of such changes to allow review and 
preparation of a rule filing and SEC approval, if necessary, and to 
clarify that Nasdaq has sole discretion as to whether it chooses to 
submit a rule filing and, if submitted, whether to withdraw such 
rule filing.
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    Nasdaq also believes that it is appropriate in these instances to 
charge the $5,000 fee assessed for Substitution Listing Events,\9\ 
which will offset the costs associated with Nasdaq's listing review 
and, if necessary, rule filing, as well as the costs to maintain and 
revise Nasdaq's records, and distribute information to market 
participants about the change. Therefore, Nasdaq is adding language to 
Rules 5730 and 5740 to clarify that the existing Substitution Listing 
Event fee also applies to situations where a company changes the index, 
portfolio, or reference asset underlying its security.
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    \9\ See Securities Exchange Act Release No. 76550 (December 3, 
2015), 80 FR 76605 (December 9, 2015) (SR-NASDAQ-2015-146, adopting 
a Substitution Listing Event fee for securities listed under the 
Rule 5700 Series).
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    Finally, Nasdaq proposes to remove transitional language within 
Rule 5005(a)(40), which excluded a business combination that was 
publicly announced prior to October 15, 2013,

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from being considered a Substitution Listing Event. Nasdaq does not 
believe that any company listed on Nasdaq has an uncompleted business 
combination announced prior to that date, which would be considered a 
Substitution Listing Event. As such, Nasdaq believes this is a 
technical change to remove an expired transition.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\10\ in general, and with 
Sections 6(b)(4) and (5) of the Act,\11\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members, issuers and other persons using its 
facilities, and is designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest; 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    Nasdaq believes that the proposed requirement that the issuer of 
securities listed under the Rule 5700 Series notify Nasdaq 15 calendar 
days in advance of changes to the index, portfolio, or reference asset 
underlying the security is consistent with the investor protection 
objectives of Section 6(b)(5) of the Act in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to a free and open market and national market system, and in general to 
protect investors and the public interest.
    Specifically, the proposed change will help ensure that Nasdaq has 
sufficient time to review the revised index, portfolio, or reference 
asset and determine whether the product complies with Nasdaq's listing 
requirements and whether a rule filing must be filed by Nasdaq pursuant 
to Section 19(b)(1) of the Act and approved by the Commission or 
otherwise take effect (as applicable), which will help protect 
investors.
    Moreover, by including this category of changes in the definition 
of a Substitution Listing Event, Nasdaq will charge a $5,000 fee in 
connection with the changes, which will help ensure that adequate 
resources are available for Nasdaq to conduct this review. In addition, 
the proposed change will clarify that Nasdaq will halt a security if 
the issuer implements a change that requires a rule filing before that 
rule filing is approved or effective (as applicable), and delist the 
security if Nasdaq determines not to file or withdraws the rule filing, 
or the SEC disapproves the rule filing, thereby protecting investors.
    Including changes to the index, portfolio, or reference asset 
underlying a security in the list of Substitution Listing Events 
subject to a $5,000 fee is reasonable and equitably allocated in that 
it is designed to compensate Nasdaq for the work required in connection 
with effecting changes that the issuer has initiated. As noted above, 
changes made to a security's underlying index, portfolio or reference 
assets require Nasdaq to review the issuer's listing compliance and may 
require Nasdaq to submit a rule filing to the Commission. It is 
reasonable and equitable to allocate the costs of these actions to the 
issuer that implements the change or event, just as Nasdaq does in 
connection with other Substitution Listing Events.
    The proposed change to eliminate transitional language from Rule 
5005(a)(40) will simplify Nasdaq's rules, thereby removing a potential 
impediment to a free and open market and national market system.

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. This rule proposal 
is not primarily based on competition, but rather is designed to ensure 
that Nasdaq staff has adequate time and resources to review a change to 
an index, portfolio, or reference asset for compliance with the listing 
requirements and to file and obtain approval or effectiveness of a rule 
change, if necessary. As such, Nasdaq believes the proposed change will 
have no impact on competition.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\12\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of its 
intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
states that such waiver will allow the Exchange to immediately receive 
the benefit of additional time to review changes to indices, 
portfolios, or reference assets underlying securities listed under the 
Rule 5700 Series for compliance with the listing requirements and 
federal securities law requirements. The Exchange further states that 
the additional notification time required by the proposal relating to 
such changes will help to prevent potential disruptions to listings of 
securities listed under the Rule 5700 Series, thereby helping to 
protect investors and the public interest.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The Exchange states that the proposal will help ensure that the 
Exchange has sufficient time to review a revised index, portfolio, or 
reference asset underlying a security listed under the Rule 5700 Series 
to determine whether the product complies with the Exchange's listing 
requirements and

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whether a rule filing must be filed by the Exchange pursuant to Section 
19(b)(1) of the Act. Accordingly, the Commission designates the 
proposed rule change to be operative upon filing.\16\
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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. 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 email to [email protected]. Please include 
File Number SR-NASDAQ-2016-059 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2016-059. This 
file number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. 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-NASDAQ-2016-059 and should 
be submitted on or May 23, 2016.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-10147 Filed 4-29-16; 8:45 am]
 BILLING CODE 8011-01-P