[Federal Register Volume 84, Number 174 (Monday, September 9, 2019)]
[Notices]
[Pages 47334-47336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19334]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86857; File No. SR-NASDAQ-2019-066]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Clarify Rule 4120(c)(9)
September 3, 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 August 21, 2019, 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 clarify Rule 4120(c)(9) without changing
its substance.
The text of the proposed rule change is set forth below. Proposed
new language is italicized; deleted text is in brackets.
* * * * *
The Nasdaq Stock Market Rules
* * * * *
4120. Limit Up-Limit Down Plan and Trading Halts
(a)-(b) No change.
(c) Procedure for Initiating and Terminating a Trading Halt
(1)-(8) No change.
(9) For purposes of this Rule and Rule 4753, the process for
halting and initial pricing of a security that is the subject of an
initial public offering shall also be available for the initial pricing
of any other security that has not been listed
[[Page 47335]]
on a national securities exchange or traded in the over-the-counter
market pursuant to FINRA Form 211 immediately prior to the initial
pricing, provided that a broker-dealer serving in the role of financial
advisor to the issuer of the securities being listed is willing to
perform the functions under Rule 4120(c)(8) that are performed by an
underwriter with respect to an initial public offering. If more than
one broker-dealer is serving in the role of financial advisor, the
issuer must designate one to perform the functions under Rule
4120(c)(8).
(10) No change.
* * * * *
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
Nasdaq proposes to amend Rule 4120(c)(9) to clarify that, if more
than one broker-dealer is serving in the role of financial advisor to
the issuer, in order to use the Nasdaq IPO Cross, as defined below, to
initiate trading in securities that have not been listed on a national
securities exchange or traded in the over-the-counter market pursuant
to FINRA Form 211 immediately prior to the initial pricing, the issuer
must designate one financial advisor to perform the functions under
Rule 4120(c)(8).\3\
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\3\ On July 18, 2019, Nasdaq submitted a proposed rule change to
amend 4120(c)(9). The effect of that rule change, if approved by the
Commission, will be to make certain additional companies eligible to
use the IPO Cross. See Securities Exchange Act Release No. 86537
(July 31, 2019), 84 FR 38321 (August 6, 2019) (SR-NASDAQ-2019-060).
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In 2014, Nasdaq first adopted rules to allow the use of the Nasdaq
IPO Cross to initiate trading in securities that have not been listed
on a national securities exchange or traded in the over-the-counter
market pursuant to FINRA Form 211 immediately prior to the initial
pricing and described the role of financial advisors in that
process.\4\ At that time, the Exchange added new Rule 4120(c)(9) \5\ to
set forth the process by which trading commences in such securities.
Under that rule, securities of companies that have not previously been
listed on a national securities exchange or traded in the over-the-
counter market pursuant to FINRA Form 211 immediately prior to listing
on Nasdaq can be launched for trading using the same crossing mechanism
available for IPOs outlined in Rule 4120(c)(8) and Rule 4753 (the ``IPO
Cross''). Prior to that rule change, securities of companies that were
not conducting IPOs were released using the Halt Cross outlined in Rule
4120(c)(7), which differed from the IPO Cross.\6\
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\4\ Securities Exchange Act Release No. 71931 (April 11, 2014),
79 FR 21829 (April 17, 2014) (SR-NASDAQ-2014-032) (the ``2014 Rule
Change'').
\5\ In 2014, Nasdaq filed SR-NASDAQ-2014-081 modifying the
functions that are performed by an underwriter with respect to an
initial public offering and renumbered certain paragraphs of Rule
4120. Securities Exchange Act Release No. 73399 (October 21, 2014),
79 FR 63981 (October 27, 2014) (approving SR-NASDAQ-2014-081). All
references in this filing are to the renumbered rules, as currently
in effect.
\6\ The Halt Cross process has a shorter quoting period (five
minutes) and provides no ability to extend the quoting period in the
event trading interest or volatility in the market appears likely to
have a material impact on the security, unless there is an order
imbalance as defined in the rule. See the 2014 Rule Change for
additional details on the differences between the Halt Cross and the
IPO Cross.
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The 2014 Rule Change extended the safeguards contained in the IPO
Cross to securities that have not been listed on a national securities
exchange or traded in the over-the-counter market pursuant to FINRA
Form 211 immediately prior to the initial pricing and established that
a broker-dealer serving in the role of financial advisor to the issuer
could serve in the same capacity for such securities as the underwriter
does for IPOs. Specifically, Rule 4120(c)(9) provides that the IPO
Cross process described in Rules 4120 and 4753 is available to
securities that have not been listed on a national securities exchange
or traded in the over-the-counter market pursuant to FINRA Form 211
immediately prior to the initial pricing where ``a broker-dealer
serving in the role of financial advisor to the issuer of the
securities being listed is willing to perform the functions under Rule
4120(c)(8) that are performed by an underwriter with respect to an
initial public offering.'' \7\
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\7\ Subsequent to the 2014 Rule Change Nasdaq expanded and
elaborated the functions that are performed by an underwriter with
respect to an initial public offering. See footnote 6, above. Rule
4120(c)(9) requires a broker-dealer serving in the role of a
financial advisor to the issuer of the securities being listed to
perform all such functions in order for the issuer to utilize the
IPO Cross for the initial pricing of the security.
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Rule 4120(c)(8) implies that only one underwriter performs the
functions the rule describes. Typically, such functions are performed
by the lead underwriter, which is referred to as ``the'' underwriter in
the rule.
Similarly, Nasdaq proposes to clarify that, if more than one
broker-dealer is serving in the role of financial advisor to the
issuer, in order to use the Nasdaq IPO Cross to initiate trading in
securities that have not been listed on a national securities exchange
or traded in the over-the-counter market pursuant to FINRA Form 211
immediately prior to the initial pricing, the issuer must designate one
financial advisor to perform the functions under Rule 4120(c)(8).
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\9\ 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.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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Nasdaq believes that additional clarity that the issuer must
designate one financial advisor to perform the functions under Rule
4120(c)(8) will promote fair and orderly markets by eliminating
potential confusion and by continuing to protect against volatility in
the pricing and initial trading of the unseasoned securities covered by
the proposed rule change.
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 proposed change is designed
to more clearly describe the current operation of an existing rule
without changing its substance and, therefore, Nasdaq believes that the
proposed change will not impose a burden on competition.
[[Page 47336]]
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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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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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-2019-066 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-2019-066. 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
20549-1090 on official business days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of the 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-2019-066 and should
be submitted on or before September 30, 2019.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19334 Filed 9-6-19; 8:45 am]
BILLING CODE 8011-01-P