[Federal Register Volume 84, Number 86 (Friday, May 3, 2019)]
[Notices]
[Pages 19148-19150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09018]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85743; File No. SR-NASDAQ-2019-031]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 5702 Concerning an Issuer's Obligation To Disclose Material 
Information About the Issuer's Listed Non-Convertible Bonds

April 29, 2019.
    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 15, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 amend Rule 5702 to clarify the fact that 
Rule 5250(b)(1) and IM-5250-1, which presently obligate issuers of non-
convertible bonds listed on the Nasdaq Bond Exchange to promptly 
disclose to Nasdaq any material information that would reasonably be 
expected to affect the value of their listed bonds or influence 
decisions to invest in such bonds, includes an obligation to disclose 
to Nasdaq material information about the company's equity securities, 
even if those securities are listed on a national securities exchange 
other than Nasdaq (including, for example, the New York Stock Exchange 
(``NYSE'') or the NYSE American market), to the extent that information 
about such equity securities also would reasonably be expected to 
affect the value of or influence decisions to invest in the listed 
bonds.
    The text of the proposed rule change is available on the Exchange's 
website 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
    In November 2018, the Commission approved amendments to the 
Exchange's rules that permit the Exchange to list and trade non-
convertible corporate debt securities (referred to herein as ``bonds'' 
or ``non-convertible bonds'') on the Nasdaq Bond Exchange.\3\ Under the 
Exchange's listing rules, at Rule 5702(a)(2), a non-convertible bond is 
eligible for listing on the Exchange only if its issuer concurrently 
lists at least one class of an equity security on Nasdaq, NYSE, or NYSE 
American. The Exchange noted in its proposal for the Nasdaq Bond 
Exchange that upon the effective date of its proposal, the Exchange 
would be capable of listing and trading non-convertible bonds only of 
issuers that list equity securities on Nasdaq.\4\ The Exchange stated 
that it expected to be ready to list and trade bonds of issuers with 
equity securities listed on NYSE or NYSE American by the Second Quarter 
of 2019.\5\
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    \3\ See Securities Exchange Act Release No. 34-84575 (Nov. 13, 
2018), 83 FR 58309 (Nov. 19, 2018).
    \4\ See SR-NASDAQ-2018-070 (as modified by Amendment Nos. 1-3).
    \5\ See id.
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    As the Exchange prepares to begin listing and trading bonds of 
issuers of NYSE and NYSE American listed equity securities, it proposes 
to further amend its Rules to ensure that it will have access to all of 
the information it needs to evaluate whether and when to suspend, 
delist, or halt trading in such bonds. Specifically, the proposed 
amendment would highlight to issuers that their obligation, under Rule 
5250(b)(1) and IM-5250-1, to promptly disclose to Nasdaq material 
information that could reasonably be expected to affect the value of or 
influence decisions to invest in their Nasdaq-listed bonds, includes an 
obligation to promptly notify the Exchange of material news about their 
NYSE or NYSE American listed equity securities, to the extent that such 
information about such NYSE or NYSE American listed securities could 
also reasonably be expected to affect the value of or influence 
decisions to invest in the Nasdaq-listed bonds.
    Rule 4000B(i)(1) provides that the Exchange may halt or suspend 
trading in non-convertible bonds listed on the Nasdaq Bond Exchange 
when: (1) In the Exchange's regulatory capacity, it is necessary or 
appropriate to maintain a fair and orderly market, to protect 
investors, or is in the public interest, due to extraordinary 
circumstances or unusual market conditions; (2) a class of equity that 
is issued by the same issuer as the non-convertible bond has been 
halted or suspended by, or de-listed from, the Exchange or by its 
primary listing market (NYSE or NYSE American), as applicable; (3) news 
reports have a material impact on a non-convertible bond, its issuer, 
or related stock of its issuer; or (4) the non-convertible bond is to 
be called for redemption or will mature or become subject to 
retirement, and thereafter it will be subject to de-listing.
    To assist the Exchange in determining when to halt or suspend 
trading in non-convertible bonds, Rule 5250(b)(1) and IM-5250-1 require 
that, except in unusual circumstances,\6\ Nasdaq listed

[[Page 19149]]

companies, including issuers of non-convertible bonds listed on the 
Nasdaq Bond Exchange, shall disclose promptly to the public through any 
Regulation FD compliant method (or combination of methods) any material 
information that would reasonably be expected to affect the value of 
their securities or influence investors' decisions. Under Rule 5250 and 
IM-5250-1, Nasdaq-listed companies must notify Nasdaq's MarketWatch 
Department \7\ prior to the distribution of certain material news at 
least ten minutes prior to public announcement of the news when the 
public release of the information is made, from 7:00 a.m. to 8:00 p.m. 
E.T, or prior to 6:50 a.m., if the company releases the news publicly 
other than between 7:00 a.m. and 8:00 p.m.\8\
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    \6\ As set forth in IM-5250-1, companies in unusual 
circumstances may not be required to make public disclosure of 
material events including, for example, where it is possible to 
maintain confidentiality of those events and immediate public 
disclosure would prejudice the ability of the company to pursue its 
legitimate corporate objectives. However, IM-5250-1 states that 
companies remain obligated to disclose this information to Nasdaq 
upon request pursuant to Rule 5250(a).
    \7\ Nasdaq's MarketWatch Department monitors real time trading 
in all Nasdaq securities during the trading day for price and volume 
activity.
    \8\ As set forth in IM-5250-1, such events include: (1) 
Financial-related disclosures, including quarterly or yearly 
earnings, earnings restatements, pre-announcements or guidance; (2) 
corporate reorganizations and acquisitions, including mergers, 
tender offers, asset transactions and bankruptcies or receiverships; 
(3) new products or discoveries, or developments regarding customers 
or suppliers (e.g., significant developments in clinical or customer 
trials, and receipt or cancellation of a material contract or 
order); (4) senior management changes of a material nature or a 
change in control; (5) resignation or termination of independent 
auditors, or withdrawal of a previously issued audit report; (6) 
events regarding the Company's securities, such as defaults on 
senior securities, calls of securities for redemption, repurchase 
plans, stock splits or changes in dividends, changes to the rights 
of security holders, or public or private sales of additional 
securities; (7) significant legal or regulatory developments; or (8) 
any event requiring the filing of a Form 8-K.
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    The Exchange construes Rule 5250(b)(1) and IM-5250-1 as already 
obligating an issuer of a Nasdaq-listed bond to disclose and to provide 
notice of disclosure to the Nasdaq MarketWatch Department of any news 
information--including information about the issuer's equity 
securities--that is material to the value of or an decision to invest 
in the listed bond. For avoidance of doubt, however, the Exchange 
proposes to amend Rule 5702 to reiterate and make explicit this 
obligation.
    Specifically, the Exchange proposes to reiterate, in new Rule 
5702(c), that any company that has non-convertible bonds listed on the 
Exchange under Rule 5702 is concurrently obligated, under Rule 
5250(b)(1) and IM-5250-1, to promptly disclose and provide notice of 
disclosure to Nasdaq's MarketWatch Department of any material 
information that would reasonably be expected to affect the value of 
the bond or decisions to invest in the bond. The proposal would 
emphasize that this obligation extends to material information about 
the company's equity securities, even if those securities are listed on 
a national securities exchange other than Nasdaq, to the extent that 
information about such equity securities also would reasonably be 
expected to affect the value of or influence decisions to invest in the 
bond. Potentially relevant news about the NYSE- or NYSE American-listed 
equity securities would include, among other things, a voluntary or 
involuntary delisting of the equity securities, a bankruptcy of the 
issuer, a corporate reorganization, a call for redemption of the equity 
securities, or a significant legal or regulatory development, such as a 
regulatory investigation or action.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\10\ in particular, in that it is designed to 
promote just and equitable principles of trade, 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. Specifically, the Exchange believes that the proposal will 
promote just and equitable principles of trade by helping to ensure 
that bond issuers provide prompt notice to Nasdaq's MarketWatch 
Department, in accordance with Rule 5250(b)(1) and IM-5250-1, of all 
material news--including material news about the issuer's equity 
securities listed on Nasdaq or another national securities exchange--
that can reasonably be expected to affect the value of or influence a 
decision to invest in a Nasdaq-listed bond The proposal will protect 
investors by ensuring that MarketWatch has the all of the information 
it reasonably requires to determine whether to suspend, delist, or halt 
trading in a listed bond, as set forth in Rule 4000B(i), and that it 
does not lack access to material information that is relevant to the 
value of or a decision to invest in the listed bonds due to the fact 
that the issuer has disclosed the information to another national 
securities exchange in connection with the listing of its equity 
securities on that other exchange.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposal is merely intended 
to help ensure that the Exchange has the information it needs in all 
instances to evaluate whether to suspend, delist, or halt trading in a 
Nasdaq-listed bond. The Exchange does not expect that its proposal will 
have any impact whatsoever on inter-industry competition. The Exchange 
also does not believe that the proposal will have an adverse impact on 
intra-industry competition. Although the proposal will specifically 
require bond issuers with equity securities listed on other national 
securities exchanges to promptly report material news about those 
equity securities to Nasdaq, bond issuers with Nasdaq-listed securities 
are subject to the same obligation. Moreover, the Exchange does not 
expect that its proposal will require issuers to disclose any 
information to Nasdaq that they would not otherwise be required to 
disclose to NYSE or NYSE American for similar purposes.

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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization 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) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule

[[Page 19150]]

19b-4(f)(6)(iii) \14\ permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange has asked the Commission to waive the 
30-day operative delay so that the proposed rule change may become 
effective and operative immediately upon filing. The Exchange states 
that the waiver will allow the Exchange, as soon as it begins to list 
non-convertible bonds by issuers with equity securities listed on NYSE 
and NYSE American,\15\ to have access to information about such 
issuers' equity securities that is material to the Exchange's decisions 
to suspend, de-list, or halt trading in the bonds.
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ Under Exchange Rule 5702(a)(2), a non-convertible bond is 
eligible for listing on the Exchange only if its issuer concurrently 
lists at least one class of an equity security on either Nasdaq, 
NYSE, or NYSE American.
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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 proposed rule change highlights in the Exchange bond listing rules 
the existing obligation of issuers listing non-convertible bonds to 
provide the Exchange with all material information that could 
reasonably be expected to affect the value of, or influence investors' 
decision, concerning Nasdaq listed non-convertible bonds including 
material information about an issuer's listed equity securities that 
could have such an affect, even if the equity security is listed on 
another national securities exchange.\16\ Such material information is 
important for the protection of investors and the public interest 
because this information will help the Exchange evaluate whether and 
when to suspend, de-list, or halt trading in the listed non-convertible 
bonds pursuant to Exchange rules. For these reasons, the Commission 
hereby waives the 30-day operative delay requirement and designates the 
proposed rule change as operative upon filing.\17\
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    \16\ See id.
    \17\ 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 change 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-2019-031 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-2019-031. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2019-031 and should be submitted 
on or before May 24, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09018 Filed 5-2-19; 8:45 am]
BILLING CODE 8011-01-P