[Federal Register Volume 89, Number 138 (Thursday, July 18, 2024)]
[Notices]
[Pages 58445-58447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15767]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100518; File No. SR-NASDAQ-2024-031]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish a Fee for Requests for Review of Membership Decisions and 
Decisions Related to Changes in Ownership, Control, or Material 
Business Operations

July 12, 2024.
    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 28, 2024, 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 establish a fee for requests for review of 
membership decisions and decisions related to changes in ownership, 
control, or material business operations, as described further below.
    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
    Pursuant to General 3, Rule 1015, Applicants \3\ may seek review of 
a decision by the Exchange's Membership Department regarding an 
application for membership under General 3, Rule 1014 (``Membership 
Decisions''). In addition, pursuant to Rule 1015, Members may seek 
review of a decision by the Exchange's Membership Department 
(``Department'') regarding changes to its ownership, control, or 
business operations under Rule 1017 (``Change Decisions''). Rule 
1015(a) provides that, to initiate a review, an Applicant must, within 
25 days after service of a decision under Rule 1014 or 1017, file a 
written request for review with the Exchange Review Council.\4\ Rule 
1015(a) specifies that a request for review shall state with 
specificity why the Applicant believes that the Department's decision 
is inconsistent with the bases for denial set forth in Rule 1014, or 
otherwise should be set aside, and state whether a hearing is 
requested. Rule 1015(a) also specifies that the Applicant must 
simultaneously file a copy of the request with the Department.
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    \3\ The term ``Applicant'' means a person that applies for 
membership in the Exchange under Rule 1013 or a Member that files an 
application for approval of a change in ownership, control, or 
business operations under Rule 1017. See General 3, Rule 1011(a).
    \4\ The Exchange Review Council serves as the appellate body for 
disciplinary actions appealed from FINRA Hearings Panels, Nasdaq 
Membership Department determinations, decisions made by the Exchange 
relating to market maker withdrawal/reinstatement and obvious error 
and catastrophic error petitions, and Nasdaq Phlx floor-based rules.
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    Nasdaq proposes to establish a fee of $15,000 for review of 
Membership Decisions and Change Decisions by the Exchange Review 
Council (``ERC''). Nasdaq proposes to establish a fee for review by the 
ERC to offset some of the costs that the Exchange incurs in preparing 
for and conducting reviews of Membership Decisions and Change 
Decisions, as described further below.
    The costs of the review process include significant time and 
resources to maintain the infrastructure for the processes and to 
prepare for and conduct hearings (if requested). For example, with 
respect to review by the ERC, Nasdaq incurs expenses related to the 
Nasdaq staff that facilitates the hearings and provides support to the 
ERC members, expenses related to regulatory services provided by FINRA, 
the honorarium paid to the ERC members, and the cost of maintaining a 
transcript of the hearing. Nasdaq staff and FINRA are involved in 
reviewing Applicant submissions, requesting and reviewing additional 
documents and information provided by Applicants, preparing and 
reviewing briefs, and preparing exhibits and evidence for hearings. In 
addition, Nasdaq staff may attend hearings and other meetings related 
to these reviews. Where hearings are held in person, Nasdaq also incurs 
expenses related to securing and maintaining a location for the 
hearings and travel expenses for ERC members. Nasdaq staff must manage 
and coordinate the membership application dockets, maintain the systems 
that track membership matters, and draft initial decisions for review 
by the ERC members.
    The Exchange Board has authority to call the ERC decision for 
review. There are related costs associated with the Exchange Board 
review of every ERC decision in determining whether to call a decision 
for review as described in General 3, Rule 1016. In that regard, Nasdaq 
incurs expenses related to the Nasdaq staff that facilitates the call 
for review process and that provides legal counsel and support to the 
Exchange Board members, as well as the honorarium paid to the Exchange 
Board. In addition, to the extent a decision is appealed to the SEC, 
the Exchange would incur additional costs in connection with such an 
appeal.
    The Exchange estimates that the expenses incurred in such reviews 
are comparable to or greater than the expenses incurred during reviews 
before a Hearings Panel \5\ or appeals to the Nasdaq Listing and 
Hearing Review Council (``NLHRC'').\6\ Nasdaq charges a fee of $20,000 
for review by a Hearings Panel \7\ and a fee of $15,000 to appeal a 
Hearings Panel decision to the NLHRC.\8\ Accordingly, Nasdaq proposes 
to establish a fee of $15,000 for reviews of Membership Decisions and 
Change Decisions by the ERC to offset expenses associated with such 
reviews. The new fee will allow Nasdaq to recoup a portion of the 
expenses it incurs in the review process. The Exchange has reviewed all 
costs associated with ERC reviews and does not expect or intend

[[Page 58446]]

that the proposed fee will exceed the costs.\9\
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    \5\ When a Company receives a Staff Delisting Determination or a 
Public Reprimand Letter issued by the Listing Qualifications 
Department, or when its application for initial listing is denied, 
it may request in writing that the Hearings Panel review the matter 
in a written or an oral hearing. See Rule 5815.
    \6\ A Company may appeal a Hearings Panel Decision to the NLHRC. 
See Rule 5820.
    \7\ See Rule 5815(a)(3).
    \8\ See Rule 5820(a).
    \9\ A precise cost-per-appeal analysis is not possible given the 
need to maintain an infrastructure for which the Exchange incurs 
expenses irrespective of the number of reviews requested in a given 
year.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    Specifically, establishing the proposed fee is reasonable because 
it will help offset Nasdaq's costs related to reviews of Membership 
Decisions and Change Decisions, which serve to ensure that Nasdaq's 
membership standards are properly enforced for the protection of 
investors. The proposed changes are equitable and not unfairly 
discriminatory because they would apply equally to all Applicants that 
choose to request a review of a Membership Decision or Change Decision. 
In addition, aligning the fee for reviews with the underlying costs of 
the review process is equitable because doing so will help minimize the 
extent that Applicants that meet all membership standards may subsidize 
the costs of review for Applicants that fail to meet the membership 
standards.
    Nasdaq also believes that the proposed fee is consistent with the 
investor protection objectives of Section 6(b)(5) of the Act \12\ 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 
systems, and in general to protect investors and the public interest. 
Specifically, the fee is designed to provide adequate resources for 
appropriate preparation to conduct reviews of Membership Decisions and 
Change Decisions, which help to assure that the Exchanges' membership 
standards are properly enforced and investors are protected.
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    \12\ 15 U.S.C. 78f(b)(5).
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    Nasdaq also believes that the proposed fee is consistent with 
Section 6(b)(7) of the Act,\13\ in that the proposed fee is consistent 
with the provision by the Exchange of fair procedures for the 
prohibition or limitation by the Exchange of any person with respect to 
access to services offered by the Exchange. In particular, the Exchange 
believes that the new fee should not deter Applicants from availing 
themselves of the right to appeal because the fee will still be set at 
a level that will be affordable for Applicants. Nasdaq does not believe 
that the proposed fee is unduly burdensome or would discourage any 
Applicant from seeking a review.
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    \13\ 15. U.S.C. 78f(b)(7).
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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. As discussed above, 
this proposed fee is based on the costs to the Exchange to provide a 
review process for Membership Decisions and Change Decisions, which is 
in turn necessary to ensure investor protection as well as a 
transparent process for Applicants. The Exchange notes that it operates 
in a highly competitive market in which market participants can readily 
favor competing venues if they deem fees at a particular venue to be 
excessive or opportunities available at other venues to be more 
favorable. Applicants may freely choose alternative venues based on the 
aggregate fees assessed. This rule proposal does not burden competition 
with other venues, which are similarly free to align their fees based 
on the costs incurred by the process they offer. For this reason, and 
the reasons discussed in connection with the statutory basis for the 
proposed rule change, Nasdaq does not believe that the proposed rule 
change will result in any burden 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\14\
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2024-031 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-2024-031. 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 (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-2024-031 and should 
be submitted on or before August 8, 2024.


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-15767 Filed 7-17-24; 8:45 am]
BILLING CODE 8011-01-P