[Federal Register Volume 88, Number 130 (Monday, July 10, 2023)]
[Notices]
[Pages 43637-43639]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-14443]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97833; File No. SR-NASDAQ-2023-017]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Modify the Package of 
Complimentary Services Provided to Certain Eligible Switches and Make 
Other Changes to IM-5900-7 and IM-5900-7A

July 3, 2023.
    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 June 21, 2023, 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, 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 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 modify the package of complimentary 
services provided to certain Eligible Switches, to update the values of 
complimentary services provided under Listing Rules IM-5900-7 and IM-
5900-7A, and to remove certain obsolete provisions.
    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 offers complimentary services under Listing Rule IM-5900-7 
to Eligible New Listings \3\ and Eligible Switches \4\ newly listing on 
Nasdaq (collectively, ``Eligible Companies'').\5\ Nasdaq believes that 
the complimentary service program offers valuable services to newly 
listing companies, designed to help ease the transition of becoming a 
public company or switching markets, and makes listing on Nasdaq more 
attractive to these companies. The services offered include a 
whistleblower hotline, investor relations website, disclosure services 
for earnings or other press releases, webcasting, market analytic 
tools, environmental, social and governance (``ESG'') services, and may 
include market advisory tools such as stock surveillance (collectively 
the ``Service Package'').\6\ Nasdaq is filing this proposed rule change 
to modify the ESG services available to Eligible Switches with a market 
capitalization of $5 billion or more. Nasdaq also is proposing to 
update the values of the complimentary services provided under Rules 
IM-5900-7 and IM-5900-7A and to remove obsolete provisions from IM-
5900-7A.
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    \3\ IM-5900-7 defines an Eligible New Listing as ``a Company 
listing on the Global or Global Select Market in connection with: 
(i) an initial public offering in the United States, including 
American Depository Receipts (other than a Company listed under IM-
5101-2), (ii) upon emerging from bankruptcy, (iii) in connection 
with a spin-off or carve-out from another Company, (iv) in 
connection with a Direct Listing as defined in IM-5315-1 (including 
the listing of American Depository Receipts), or (v) in conjunction 
with a business combination that satisfies the conditions in IM-
5101-2(b).''
    \4\ IM-5900-7 defines an Eligible Switch as ``a Company: (i) 
(other than a Company listed under IM-5101-2) switching its listing 
from the New York Stock Exchange to the Global or Global Select 
Markets, or (ii) that has switched its listing from the New York 
Stock Exchange and listed on Nasdaq under IM-5101-2 after the 
Company 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.''
    \5\ IM-5900-7A describes the Service Package available to 
companies that listed before March 12, 2021, the effective date of 
SR-Nasdaq-2021-002. See Securities Exchange Act Release No. 91318 
(March 12, 2021), 86 FR 14774 (March 18, 2021) (modifying the 
package of complimentary services provided to eligible companies and 
memorializing as IM-5900-7A the services offered to eligible 
companies that listed before the effective date of the change).
    \6\ In addition, all companies listed on Nasdaq receive other 
standard services from Nasdaq, including Nasdaq Online and the 
Market Intelligence Desk.
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    In 2021, Nasdaq first included ESG services in the Service Package 
for all Eligible Companies.\7\ Specifically, all Eligible Companies 
receive access to a Core ESG software solution,\8\ which simplifies the 
gathering, tracking, approving, managing and disclosing of ESG data.\9\ 
Based on Nasdaq's experience since first including the ESG services, 
Nasdaq has become aware that as companies mature and become larger, 
they no longer rely on services like the Core ESG software solution, 
but instead need more sophisticated programs with additional metrics. 
Accordingly, the Core ESG software solution is not valuable to these 
larger seasoned companies and Nasdaq proposes to instead offer Eligible 
Switches with a market capitalization of $5 billion or more an advanced 
software solution, which will enable the company to select additional 
metrics to use in the solution (``Advanced ESG Software 
Solution'').\10\ Specifically, the Advanced ESG Software Solution 
allows the company to track approximately ten times as many standard 
performance indicators and also allows the company to select and track 
additional custom performance indicators. In addition, each of these 
companies is at a different phase in implementing an ESG strategy and 
therefore Nasdaq will also offer these companies $60,000 worth of 
bespoke ESG consulting services per year designed to aid the company in 
identifying and incorporating ESG metrics into communications, with 
customized analysis and recommendations (``ESG Advisory Services''). 
Each of these services would be available to Eligible Switches with a 
market capitalization of $5 billion or more for the same four-year term

[[Page 43638]]

provided for other services under IM-5900-7. While Nasdaq believes that 
these services will be valuable to these companies, and will provide 
information important for communicating with their investors and other 
stakeholders, no company is required to use these services as a 
condition of listing. As is the case with other complimentary services, 
at the end of the package term, companies may choose to renew these 
services or discontinue them.
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    \7\ Securities Exchange Act Release No. 91318, supra.
    \8\ This service is currently called ``ESG Core'' in IM-5900-7. 
Nasdaq is proposing to make a technical change to rename the service 
to ``Core ESG Software Solution'' in the proposed rule filing. No 
other changes are being proposed to the service.
    \9\ Eligible Companies that have a market capitalization of $750 
million or more also receive access to an ESG Education & Sector 
Benchmarking Service to help them understand the ESG landscape. No 
change is proposed with respect to this service.
    \10\ This service has a retail value of approximately $52,500 
per year. In addition, one-time development fees of up to $21,500 to 
establish the services in the first year will be waived. The one-
time development fees reflect the high level of customization 
available in this product. The total one-time development fees that 
are waived for Eligible Companies that receive this service, as 
reflected in proposed Rule IM-5900-7(d)(3)(A) is approximately 
$26,500, which also includes approximately $5,000 to establish the 
investor relations website.
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    The proposed new services will be available to Eligible Switches 
with a market capitalization of $5 billion or more that list after the 
date of approval of the proposed rule change. Nasdaq proposes to add a 
new paragraph to IM-5900-7(d)(3) to memorialize the services provided 
to an Eligible Switch with a market capitalization of $5 billion or 
more that listed before that date.
    Nasdaq also proposes to update the values of the services contained 
in Listing Rules IM-5900-7 and IM-5900-7A to their current values.\11\ 
Depending on a company's market capitalization and whether it is an 
Eligible New Listing or an Eligible Switch, the total revised value of 
the services provided to Eligible Companies (including the waiver of 
one-time fees) ranges from $364,800 to $1,533,000.\12\ Finally, Nasdaq 
proposes to simplify Rule IM-5900-7A by cross-referencing the 
description of services and their values that also appears in IM-5900-7 
and by deleting the descriptions of offerings that are no longer 
available to any companies.\13\
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    \11\ These services are offered through Nasdaq Corporate 
Solutions, LLC, an affiliate of Nasdaq, or a third-party provider 
selected by Nasdaq.
    \12\ The exact values are set forth in proposed IM-5900-7 and 
IM-5900-7A. In describing the total value of the services for 
companies that can select more than one market advisory tool, Nasdaq 
presumes that a company would use stock surveillance, which has an 
approximate retail value of $56,500, and global targeting, which has 
an approximate retail value of $48,000. Companies could, of course, 
select different combinations of the three services offered, but 
these other combinations would have lower total approximate retail 
values.
    \13\ The services described in IM-5900-7A(c) and (d)(1) were 
provided for a term of two years to companies that listed before 
March 12, 2021. In addition, no company still receives the services 
described in IM-5900-7A(g), which applies only to companies that 
listed before April 23, 2018.
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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.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\15\ 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. It is also consistent with this provision because it 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) \16\ and 6(b)(8),\17\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78f(4).
    \17\ 15 U.S.C. 78f(8).
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    Nasdaq faces competition in the market for listing services,\18\ 
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. All 
similarly situated companies are eligible for the same package of 
services. The proposed Advanced ESG Software Solution and ESG Advisory 
Services will help eligible companies communicate with their 
shareholders and other stakeholders by helping collect, store and 
disclose ESG data chosen by the company and guiding messaging and 
reporting of that information. The services will also help assess the 
company's current ESG program, identify ESG risk and opportunities, and 
establish strategies for risk management and opportunity capture. While 
the proposed services will be available only to Eligible Switches with 
a market capitalization of $5 billion or more, Nasdaq does not believe 
that it is unfairly discriminatory to offer different services based on 
a company's market capitalization given that larger companies generally 
will need more and different ESG services, and that those issuers will 
likely bring greater future value to Nasdaq than will other issuers by 
switching to its market.\19\ Moreover, those companies would more 
likely forego ESG services offered by their current exchange when 
switching their listing to Nasdaq, which smaller companies would 
not.\20\
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    \18\ The Justice Department has noted the intense competitive 
environment for exchange listings. See ``NASDAQ OMX Group Inc. and 
Intercontinental Exchange 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.
    \19\ See Securities Exchange Act Release No. 65963 (December 15, 
2011), 76 FR 79262 at 79265 (December 21, 2011).
    \20\ See Securities Exchange Act Release No. 94222 (February 10, 
2022), 87 FR 8886 (February 16, 2022) (approving changes to NYSE 
Listed Company Manual Section 907.00, including the offer of ESG 
tools to currently listed companies with 270 million or more total 
shares of common stock outstanding, but not to companies with fewer 
shares outstanding).
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    The Commission has previously indicated pursuant to Section 19(b) 
of the Exchange Act \21\ that updating the values of the services 
within the rule is necessary,\22\ and Nasdaq does not believe this 
update has an effect on the allocation of fees nor does it permit 
unfair discrimination, as issuers will continue to receive the same 
services, except for the additional services described above. Further, 
this change to update the values will enhance the transparency of 
Nasdaq's rules and the value of the services it offers companies, thus 
promoting just and equitable principles of trade. As such, this aspect 
of the proposed rule change is consistent with the requirements of 
Section 6(b)(4) and (5) of the Exchange Act.
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    \21\ 15 U.S.C. 78s(b).
    \22\ See Exchange Act Release No. 72669 (July 24, 2014), 79 FR 
44234 (July 30, 2014) (SR-NASDAQ-2014-058) (footnote 39 and 
accompanying text: ``We would expect Nasdaq, consistent with Section 
19(b) of the Exchange Act, to periodically update the retail values 
of services offered should they change. This will help to provide 
transparency to listed companies on the value of the free services 
they receive and the actual costs associated with listing on 
Nasdaq.'').
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    Finally, Nasdaq notes that the proposed change to include the 
effective date of IM-5900-7A, the changes to cross reference duplicate 
product descriptions and values, and the changes to eliminate obsolete 
parts of the rules, are consistent with Section 6(b)(5) of the Exchange 
Act because they will simplify and clarify the rule and remove 
duplication without making any substantive change.
    Nasdaq 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.\23\
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    \23\ 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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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. Nasdaq believes that it is 
reasonable to offer complimentary services to attract and retain 
listings as part of this competition. The proposed rule changes reflect 
that competition, but do not impose any burden on the competition with 
other exchanges. Other exchanges can also offer similar services to 
companies, thereby increasing competition to the benefit of those 
companies and their shareholders.
    Further, all similarly situated companies are eligible for the same 
package of services. While the proposed services will be available only 
to Eligible Switches with a market capitalization of $5 billion or 
more, Nasdaq does not believe that it is unfairly discriminatory to 
offer different services based on a company's market capitalization 
given that larger companies generally will need more and different ESG 
services, and that those issuers will likely bring greater future value 
to Nasdaq by switching to its market than would other issuers.
    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.

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2023-017 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-2023-017. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NASDAQ-2023-017 and should 
be submitted on or before July 31, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2023-14443 Filed 7-7-23; 8:45 am]
BILLING CODE 8011-01-P