[Federal Register Volume 89, Number 149 (Friday, August 2, 2024)]
[Notices]
[Pages 63242-63244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17026]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100613; File No. SR-NASDAQ-2024-042]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Nasdaq Rule 5710(k)(i) Relating to Equity Index-Linked Securities

July 29, 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 July 22, 2024, 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 its listing rules under Rule 
5710(k)(i) related to the criteria for Equity Index-Linked Securities.
    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

[[Page 63243]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is submitting this proposal in order to bring its 
listing rules related to Equity Index-Linked Securities in line with 
those of NYSE Arca, Inc. (``Arca'') and Cboe BZX Exchange, Inc. 
(``BZX'').\3\ Rule 5710(k) sets forth certain rules related to the 
listing and trading of Linked Securities \4\ on the Exchange and Rule 
5710(k)(i) relates specifically to the generic listing standards 
applicable to Equity Index-Linked Securities.\5\ Specifically, Rule 
5710(k)(i)(A) provides that each index underlying a series of Equity 
Index-Linked Securities must include at least 10 component securities 
and meet the requirements of either Rule 5710(k)(i)(A)(1) or (2). Rule 
5710(k)(i)(A)(1) provides that each index must have been reviewed and 
approved for the trading of options or other derivatives by the 
Commission under Section 19(b)(2) of the Act and rules thereunder and 
the conditions set forth in the Commission's approval order, including 
comprehensive surveillance sharing agreements for non-U.S. stocks, 
continue to be satisfied. Rule 5710(k)(i)(A)(2) provides certain 
quantitative standards related to the market cap, trading volume, 
rebalancing, concentration, and surveillance sharing.\6\ As noted 
above, where an index has at least 10 component securities and meets 
the criteria of either Rule 5710(k)(i)(A)(1) or (2), it meets the 
initial listing criteria for Equity Index-Linked Securities. Rule 
5710(k)(i)(B) includes the continued listing criteria for Equity Index-
Linked Securities and provides that Nasdaq will commence delisting or 
removal proceedings (unless the Commission has approved the continued 
trading of the subject Equity Index-Linked Security), if any of the 
standards set forth in Rule 5710(k)(i)(A) are not continuously met, 
with some additional concentration and trading volume criteria.
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    \3\ See Arca Rule 5.2-E(j)(6)(B)(I) and BZX Rule 
14.11(d)(2)(K)(i). See also Securities Exchange Act Release Nos. 
81442 (August 18, 2017), 82 FR 40178 (August 24, 2017) (SR-NYSEArca-
2017-54) (Notice of Filing of Amendment No. 1 and Order Granting 
Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment No. 1, To Amend the Generic Listing Criteria Applicable to 
Equity Index-Linked Securities); and 82895 (March 16, 2018), 83 FR 
12633 (March 22, 2018) (SR-CboeBZX-2018-020) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend Its 
Listing Rules Under Rule 14.11(d)(2)(K)(i) Related to Equity Index-
Linked Securities).
    \4\ Linked Securities are securities that qualify for Exchange 
listing and trading under Rule 5710 and include the following: 
Equity Index-Linked Securities, Commodity-Linked Securities, Fixed 
Income Index-Linked Securities, Futures-Linked Securities, and 
Multifactor Index-Linked Securities. See Rule 5710.
    \5\ See Securities Exchange Act Release No. 66648 (March 23, 
2012), 77 FR 19428 (March 30, 2012) (SR-NASDAQ-2012-013) (Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment 
No. 1 Thereto, Relating to the Adoption of Listing Standards for 
Certain Securities).
    \6\ The Exchange notes that today, it does not use dollar 
weighting in Rule 5710(k)(i)(A)(2)(a) like Arca in Arca Rule 5.2-
E(j)(6)(B)(I)(1)(b)(i). In this respect, the Exchange's current 
initial listing criteria aligns instead to BZX's listing criteria in 
BZX Rule 14.11(d)(2)(K)(i)(a)(2)(A).
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    The Exchange proposes to amend Rule 5710(k)(i) related to Equity 
Index-Linked Securities in order to make it substantively identical to 
the comparable rules on Arca and BZX. In particular, the Exchange is 
proposing to make certain changes to its rules consistent with Arca's 
and BZX's rules such that: (i) Derivative Securities Products \7\ and 
Linked Securities will be excluded from several initial and continued 
listing criteria; (ii) the rule text makes clear that Rule 
5710(k)(i)(A)(1) includes a series of Index Fund Shares approved by the 
Commission under Section 19(b)(2) of the Act; (iii) the existing 
trading volume requirement under Rule 5710(k)(i)(A)(2)(b) is replaced 
with a more flexible trading volume standard; (iv) rules with standards 
applicable only to certain index weightings, including equal-dollar, 
modified equal-dollar, capitalization-weighted, and modified 
capitalization-weighted, are eliminated; and (v) Rule 
5710(k)(i)(A)(2)(g) \8\ provides that securities of a foreign issuer 
(including when they underlie ADRs) whose primary trading market 
outside the United States is not a member of the Intermarket 
Surveillance Group (``ISG'') or a party to a comprehensive surveillance 
sharing agreement with the Exchange will not in the aggregate represent 
more than 50% of the dollar weight of the index, and (i) the securities 
of any one such market may not represent more than 20% of the dollar 
weight of the index, and (ii) the securities of any two such markets 
may not represent more than 33% of the dollar weight of the index.
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    \7\ Derivative Securities Products include the following: 
Exchange Traded Fund Shares (Rule 5704); Portfolio Depository 
Receipts and Index Fund Shares (Rule 5705); Trust Issued Receipts 
(Rule 5720); Commodity-Based Trust Shares, Currency Trust Shares, 
Commodity Index Trust Shares, Commodity Futures Trust Shares, 
Partnership Units, Trust Units, Managed Trust Shares (Rule 5711); 
and Managed Fund Shares (Rule 5735). See Rule 5705(b)(3)(A)(i)(a).
    \8\ Current Rule 5710(k)(i)(A)(2)(g) will be renumbered to Rule 
5710(k)(i)(A)(2)(e) under this proposal.
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    The Exchange also proposes to amend the continued listing criteria 
for Equity Index-Linked Securities in Rule 5710(k)(i)(B) to exclude 
Derivative Securities Products and Linked Securities, similar to the 
changes being proposed in its initial listing criteria for Equity 
Index-Linked Securities in Rule 5710(k)(i)(A). The Exchange notes that 
Arca and BZX likewise exclude these products from their relevant 
continued listing standards.\9\
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    \9\ See supra note 3.
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    The Exchange believes that these proposed changes are non-
controversial because the changes would make the Exchange's listing 
rules related to Equity Index-Linked Securities substantively identical 
to the rules of other listing exchanges \10\ and do not present any new 
or novel issues that have not been previously considered by the 
Commission.
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    \10\ See supra note 6.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    The proposed changes to Rule 5710(k)(i) related to the listing of 
Equity Index-Linked Securities on the Exchange remain consistent with 
the Act because as noted above, the changes will make the Exchange's 
listing rules for Equity Index-Linked Securities substantively 
identical to those of Arca and BZX.\13\
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    \13\ See supra note 6.
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    As such, the Exchange believes that the proposal is designed to 
prevent fraudulent and manipulative acts and practices, 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 because 
there are no substantive issues raised by this

[[Page 63244]]

proposal that were not otherwise addressed by the Commission.

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 that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange believes that 
the proposal will allow the Exchange to better compete with Arca and 
BZX by putting Nasdaq on equal footing with the other two exchanges as 
it relates to listing standards applicable to Equity Index-Linked 
Securities.

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

    Pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) \15\ thereunder, the Exchange has designated this proposal as 
one that effects a change that: (i) does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) by its terms, does not 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest.\16\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ In addition, Rule 19b-4(f)(6) requires a self-regulatory 
organization to give the Commission written notice of its intent to 
file 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. See id. The Exchange has satisfied 
this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requested 
that the Commission waive the 30-day operative delay so that the 
proposal may become operative immediately upon filing. The proposed 
rule change, which modifies certain listing standards applicable to 
Equity Index-Linked Securities, conforms to substantially similar rules 
of other exchanges \18\ and raises no unique or novel legal or 
regulatory issues. Therefore, the Commission believes that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest. Accordingly, the Commission hereby 
waives the 30-day operative delay and designates the proposed rule 
change operative upon filing.\19\
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    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ See, e.g., BZX Rule 14.11(d)(2)(K)(i)(a) and (b) (setting 
forth the initial and continued listing standards for Equity Index-
Linked Securities). See also supra note 3 and accompanying text.
    \19\ 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.

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-2024-042 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-2024-042. 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-2024-042 and should 
be submitted on or before August 23, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-17026 Filed 8-1-24; 8:45 am]
BILLING CODE 8011-01-P