[Federal Register Volume 85, Number 183 (Monday, September 21, 2020)]
[Notices]
[Pages 59346-59349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20700]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89875; File No. SR-NASDAQ-2020-060]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change, As Modified by Amendment No. 
1, To Treat as an Eligible Switch, for Purposes of IM-5900-7, an 
Acquisition Company That Switches From NYSE to Nasdaq After Announcing 
a Business Combination

September 15, 2020.
    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 1, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') a proposed rule change. On September 14, 
2020, the Exchange filed Amendment No. 1 to the proposed rule change, 
which amended and replaced the proposed rule change in its entirety. 
The proposed rule change, as modified by Amendment No. 1, is described 
in Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change, as modified by Amendment No. 1, 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 treat as an Eligible Switch, for purposes 
of IM-5900-7, an Acquisition Company that

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switches from NYSE to Nasdaq after announcing a business combination. 
This Amendment No. 1 replaces and supersedes the original filing in its 
entirety.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 modify IM-5900-7 to treat as an Eligible Switch 
under that rule any Acquisition Company (as defined below) that both: 
(i) Switched its listing from the New York Stock Exchange (``NYSE'') to 
list on Nasdaq under IM-5101-2 after the company publicly announced 
that it entered into a binding agreement for a business combination; 
and (ii) subsequently satisfies the conditions in IM-5101-2(b) and 
lists on the Nasdaq Global or Global Select Markets in conjunction with 
that business combination.\3\
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    \3\ This Amendment No. 1 replaces and supersedes the original 
filing in its entirety to make clarifying changes.
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    Nasdaq Rule IM-5101-2 imposes additional listing requirements on a 
company whose business plan is to complete an initial public offering 
(``IPO'') and engage in a merger or acquisition with one or more 
unidentified companies within a specific period of time (``Acquisition 
Companies'').\4\ An Acquisition Company does not have an operating 
business and tends to trade infrequently and in a tight range until the 
company completes an acquisition. Therefore, these Acquisition 
Companies do not generally need shareholder communication services, 
market analytic tools or market advisory tools and, upon listing 
(whether as an IPO or when switching from another market), these 
Acquisition Companies do not receive complimentary services from Nasdaq 
under IM-5900-7.\5\ However, a company completing a business 
combination with a Nasdaq-listed Acquisition Company is eligible to 
receive services under IM-5900-7 when it lists on the Nasdaq Global or 
Global Select Market in conjunction with a business combination that 
satisfies the conditions in IM-5101-2(b).\6\ At this point, the 
Acquisition Company transitions to being an operating company and has a 
similar need as other companies for shareholder communication services, 
market analytic tools and market advisory tools. For this purpose, the 
Acquisition Company is treated as an ``Eligible New Listing'' under the 
rule, similar to a company listing in connection with its IPO.\7\
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    \4\ Securities Exchange Act Release No. 58228 (July 25, 2008), 
73 FR 44794 (July 31, 2008) (adopting the predecessor to IM-5101-2).
    \5\ See Securities Exchange Act Release No. 79366 (November 21, 
2016), 81 FR 85663 (November 28, 2016).
    \6\ IM-5900-7(e).
    \7\ Under IM-5900-7 ``Eligible New Listings'' include 
``companies listing on the Global or Global Select Markets in 
connection with their initial public offering in the United States, 
including American Depository Receipts (other than a company listed 
under IM-5101-2), upon emerging from bankruptcy, in connection with 
a spin-off or carve-out from another company, in connection with a 
Direct Listing as defined in IM-5315-1 (including the listing of 
American Depository Receipts), or in conjunction with a business 
combination that satisfies the conditions in IM-5101-2(b).''
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    Nasdaq treats a company that switches its listing from NYSE to the 
Nasdaq Global or Global Select Market as an ``Eligible Switch'' and 
offers such companies a package of services that can be more valuable 
than the package of services offered to Eligible New Listings.\8\ This 
enhanced package, in part, reflects the competition in the market for 
listing services.
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    \8\ An Eligible Switch with a market capitalization less than 
$750 million receives the same package of services for the same two 
year term as an Eligible New Listing. An Eligible Switch with a 
market capitalization of $750 million of more receives service with 
a higher total retail value than a comparably sized Eligible New 
Listing and will receive those services for four years instead of 
two years.
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    Under this construct, an Acquisition Company listed on NYSE that 
switches to Nasdaq as an Acquisition Company would not receive any 
services when it switches, even if it has already announced its 
business combination, but would receive services as an Eligible New 
Listing when it completes a business combination that satisfies the 
requirements of IM-5101-2(b). On the other hand, if the company waits 
until it completes a business combination and then switches to Nasdaq, 
the company would not be listing on Nasdaq as an Acquisition Company 
under IM-5101-2 and the company would receive services with a higher 
value as an Eligible Switch.
    Nasdaq believes that certain companies may prefer to switch markets 
after they announce their business combination, but before they 
consummate it, and that the competition for listing such a company is 
similar to the competition for a company that qualifies as an Eligible 
Switch today. Accordingly, Nasdaq proposes to treat as an Eligible 
Switch any company that switches its listing from NYSE and lists on 
Nasdaq under IM-5101-2 after the company has publicly announced that it 
entered into a binding agreement for a business combination and that 
subsequently satisfies the conditions in IM-5101-2(b) and lists on the 
Global or Global Select Market in conjunction with that business 
combination.\9\
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    \9\ In the event that the Acquisition Company terminates the 
business combination that was announced when it switched it would 
not be eligible to receive services as an Eligible Switch under the 
proposed rule; however, if the Acquisition Company subsequently 
completes a different business combination it may be eligible to 
receive services as an Eligible New Listing as described in existing 
IM-5900-7(e).
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    Removing the existing incentive for an Acquisition Company to delay 
switching until the time of its business combination will allow Nasdaq 
to process both the removal of the Acquisition Company and the 
simultaneous addition of the operating company, which will help ensure 
that the transaction is processed smoothly for the benefit of the 
company's investors. Otherwise, multiple markets would need to 
carefully choreograph the removal of the company's securities from one 
market, a change in the name and symbol of the securities, and the 
addition of securities to another market, which all occurs in 
conjunction with a significant corporate event--the closing of the 
business combination.
    Of course an Acquisition Company could only switch its listing to 
Nasdaq if it satisfies all of Nasdaq's initial listing requirements. In 
addition, the combined company would again have to satisfy all initial 
listing requirements at the time of the business combination.\10\ As 
under existing rules, the Acquisition Company itself would not receive 
services as an Eligible Switch under the proposed rule and the services 
would only be available to the company upon

[[Page 59348]]

completing its business combination and listing on the Nasdaq Global or 
Global Select Markets pursuant to the conditions described in IM-5900-
7(e).\11\
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    \10\ See IM-5101-2(d) and (e).
    \11\ Nasdaq has proposed to offer Acquisition Companies listed 
on Nasdaq a complimentary global targeting tool. See Exchange Act 
Release No. 89413 (July 28, 2020), 85 FR 46759 (August 3, 2020) (SR-
Nasdaq-2020-044). If approved, an Acquisition Company that switches 
its listing to Nasdaq after the public announcement that the company 
entered into a binding agreement for the business combination 
intended to satisfy the conditions in IM-5101-2(b), as described 
herein, would be eligible to receive that tool from the date of 
listing until 60 days following the completion of the business 
combination, or such time that the Acquisition Company publicly 
announces that such agreement is terminated.
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    Nasdaq notes that no other company will be required to pay higher 
fees as a result of the proposed amendments and represents that 
providing these services will have no impact on the resources available 
for its regulatory programs.
    Finally, Nasdaq proposes non-substantive technical amendments to 
IM-5900-7. Specifically, Nasdaq proposes to eliminate most of the 
description of the history of the rule from the rule text because it is 
no longer applicable to any companies. However, Nasdaq proposes to 
relocate to a new paragraph (g) and make minor non-substantive changes 
to the discussion about the 2018 change to the services offered because 
some companies are still eligible to receive services under the rule in 
effect prior to the 2018 change.\12\ Nasdaq also proposes to renumber 
other paragraphs of the rule in order to improve the rules' 
readability.
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    \12\ See Securities Exchange Act Release No. 82976 (March 30, 
2018), 83 FR 14683 (April 5, 2018) (SR-NASDAQ-2018-023). This rule 
change became operative for new listings on or after April 23, 2018. 
An Eligible Switch that listed under the rule in effect before this 
date could receive services under the prior rule for up to four 
years from its listing date.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Exchange Act,\13\ in general, and furthers the objectives 
of Section 6(b)(5) of the Exchange Act,\14\ 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 and is not designed to permit unfair 
discrimination between issuers. Nasdaq also believes that the proposed 
rule change is consistent with the provisions of Sections 6(b)(4),\15\ 
and 6(b)(8),\16\ in that the proposal is designed, among other things, 
to provide for the equitable allocation of reasonable dues, fees, and 
other charges among Exchange members and issuers and other persons 
using its facilities and that the rules of the Exchange do not impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Exchange Act.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78f(4).
    \16\ 15 U.S.C. 78f(8).
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    Nasdaq faces competition in the market for listing services,\17\ 
and competes, in part, by offering valuable services to companies. 
Nasdaq believes that it is reasonable to offer complimentary services 
to attract and retain listings as part of this competition. In 
particular, Nasdaq believes it is reasonable, and not unfairly 
discriminatory, to treat an Acquisition Company as an Eligible Switch 
for purposes of IM-5900-7 following the public announcement of the 
business combination that is intended to satisfy the conditions in 
Listing Rule IM-5101-2(b) because the Acquisition Company may 
reconsider its listing market at that time, in connection with its 
rebranding and the launch of the operating company as a public company. 
Nasdaq believes that treating the company as an Eligible Switch would 
provide an incentive to the company to list on Nasdaq.
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    \17\ The Justice Department has noted the intense competitive 
environment for exchange listings. See ``NASDAQ OMX Group Inc. and 
IntercontinentalExchange Inc. Abandon Their Proposed Acquisition Of 
NYSE Euronext After Justice Department Threatens Lawsuit'' (May 16, 
2011), available at http://www.justice.gov/atr/public/press_releases/2011/271214.htm.
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    In addition, Nasdaq believes that in most instances involving an 
Acquisition Company that has announced a business combination, the 
operating company plays a significant role in deciding where to list 
the combined company. Accordingly, it is not unfair to treat an 
Acquisition Company that has announced a business combination 
differently from one that has not yet made such an announcement. Nasdaq 
believes it is not an inequitable allocation of fees to treat an 
Acquisition Company as an Eligible Switch following the public 
announcement of the business combination that is intended to satisfy 
the conditions in Listing Rule IM-5101-2(b) for these same reasons and 
because the consideration about whether to switch markets is roughly 
the same for an Acquisition Company that has publicly announced a 
business combination as it is for other companies that are considered 
Eligible Switches.
    Nasdaq also believes that the proposed rule change is consistent 
with the objectives of Section 6(b)(5) because it will remove an 
impediment to a free and open market and a national market system, and 
will help to protect investors by removing an impediment for an 
Acquisition Company to switch its listing prior to the closing of its 
business combination. If a company is forced to wait to switch to 
Nasdaq until the time it closes the business combination in order to be 
treated as an Eligible Switch, additional risks can be introduced into 
the process because both the exchange transfer and the closing of the 
transaction, which will typically includes a concurrent name and symbol 
change, must be coordinated between two exchanges. In contrast, if the 
Acquisition Company is able to switch earlier, then there is no 
additional cross-market coordination required at the time of closing, 
which is a significant step in the company's life-cycle. The ability to 
switch before the closing without an adverse effect in the services 
that the company will receive from Nasdaq reduces potential risks for 
the company and its investors at the time of closing of the business 
combination and it will thereby remove an impediment to a free and open 
market and a national market system and help to better protect 
investors.
    The non-substantive changes to eliminate non-applicable history 
from the rule text and renumber and reorganize the rule will improve 
the rule's readability and thereby remove an impediment to a free and 
open market and a national market system and help to better protect 
investors.
    Nasdaq further represents, and this proposed rule change will help 
ensure, that individual listed companies are not given specially 
negotiated packages of products or services to list, or remain listed, 
which the Commission has previously stated would raise unfair 
discrimination issues under the Exchange Act.\18\
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    \18\ See Exchange Act Release No. 79366, 81 FR 85663 at 85665 
(citing Securities Exchange Act Release No. 65127 (August 12, 2011), 
76 FR 51449, 51452 (August 18, 2011) (approving NYSE-2011-20)).
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    Finally, Nasdaq also believes it is reasonable to balance its need 
to remain competitive with other listing venues, while at the same time 
ensuring adequate revenue to meet is regulatory responsibilities. 
Nasdaq notes that no other company will be required to pay higher fees 
as a result of the proposed amendments and it represents that providing 
this service will have no impact on the resources available for its 
regulatory programs.

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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. As noted above, Nasdaq faces 
competition in the market for listing services, and competes, in part, 
by offering valuable services to companies. The proposed rule change 
reflects that competition, but it does not impose any burden on the 
competition with other exchanges. Rather, Nasdaq believes the proposed 
changes will enhance competition for listings of Acquisition Companies.
    Other exchanges can also offer similar services to companies, 
thereby increasing competition to the benefit of those companies and 
their shareholders. Accordingly, Nasdaq does not believe the proposed 
rule change will impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Exchange Act, as 
amended.
    Nasdaq also notes that Nasdaq Corporate Solutions competes with 
other service providers in providing the services that are offered to 
Eligible Switches. To the extent that these other providers believe 
that Nasdaq offering a complimentary services for a limited time 
creates a competitive burden on their offerings, they are able to craft 
a similar program to attract Acquisition Companies that have publicly 
announced a business combination to their services.

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

    Within 45 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 Exchange consents, the Commission shall: (a) By order approve 
or disapprove 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 modified by Amendment No. 1, 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-2020-060 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-2020-060. 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-2020-060, and should be submitted 
on or before October 13, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
     
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    \19\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2020-20700 Filed 9-18-20; 8:45 am]
BILLING CODE 8011-01-P