[Federal Register Volume 84, Number 243 (Wednesday, December 18, 2019)]
[Notices]
[Pages 69444-69446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27212]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87726; File No. SR-NASDAQ-2019-092]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend Exchange Rule 5515 Which Governs the Listing of Warrants on
the Nasdaq Capital Market To Replace the Current Requirement That a
Warrant Have 400 Round-Lot Holders With a Revised Requirement of 100
Holders That Are Both Public Holders and Round-Lot Holders
December 12, 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 December 5, 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 amend Exchange Rule 5515 which governs the
listing of warrants on the Nasdaq Capital Market. Specifically, Nasdaq
proposes to replace the current requirement that a warrant have 400
Round-Lot Holders with a revised requirement of 100 Holders that are
both Public Holders and Round-Lot Holders, which is substantially
similar to a long-standing requirement for listing warrants on the NYSE
American Exchange.
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 Exchange Rule 5515 governs the initial listing of warrants
on the Nasdaq Capital Market. Among the requirements for listing
warrants on the Nasdaq Capital Market is that each warrant to be listed
must have 400 Round-Lot Holders.\3\ The corresponding
[[Page 69445]]
rule of the NYSE American Market is Section 105 of the NYSE American
Company Guide, which requires that each warrant to be listed must have
100 public warrantholders.
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\3\ Specifically, Rule 5515(a) currently provides that for
initial listing on the Nasdaq Capital Market, ``rights, warrants and
put warrants (that is, instruments that grant the holder the right
to sell to the issuing company a specified number of shares of the
Company's common stock, at a specified price until a specified
period of time) must meet the following requirements: (1) At least
400,000 issued; (2) The underlying security must be listed on Nasdaq
or be a Covered Security; (3) At least three registered and active
Market Makers; and (4) In the case of warrants, at least 400 Round
Lot Holders (except that this requirement will not apply to the
listing of rights or warrants in connection with the initial firm
commitment underwritten public offering of such warrants).''
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Prior to 2010, Nasdaq did not have a holder requirement for listing
warrants on the Nasdaq Capital Market. In 2010, Nasdaq adopted a round
lot holder requirement for the initial listing of warrants on the
Nasdaq Capital Market to help ensure that warrants listed on the Nasdaq
Capital Market had adequate distribution and a liquid trading
market.\4\ At the time, Nasdaq determined to adopt the same 400 round
lot holder requirement as applied to list warrants on the Nasdaq Global
Market.
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\4\ Securities Exchange Act Release No. 61594 (February 25,
2010), 75 FR 9982 (March 4, 2010) (SR-NASDAQ-2010-024).
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In most instances, the requirements for the Nasdaq Capital Market
are lower than those of the Nasdaq Global Market. In addition, Nasdaq
has positioned the Nasdaq Capital Market tier to compete for companies
that otherwise may list on the NYSE American exchange. Accordingly,
Nasdaq has determined to modify its minimum holder requirement to list
warrants on the Nasdaq Capital Market so that it is lower than the
requirement for the Nasdaq Global Market and substantially similar to
the requirement for NYSE American.\5\ Specifically, Nasdaq proposes to
adopt the standard of 100 Holders that are both Public Holders \6\ and
Round-Lot Holders,\7\ which is substantially similar to (but could be
more stringent than) the NYSE American 100 public warrantholders
requirement.\8\ Nasdaq is proposing no changes to Nasdaq's other
initial listing requirements for warrants on the Nasdaq Capital Market,
nor is Nasdaq proposing changes to Nasdaq's continued listing standards
for warrants.\9\
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\5\ In considering this change, Nasdaq compared the trading
quality of warrants listed on Nasdaq with that of warrants listed on
NYSE American. The study reviewed trading during 2019 for warrants
listed as of January 1, 2019, and included factors such as average
daily volume executed, average quoted and effective spreads, and
volatility. While it is difficult to draw conclusions given the
small universe of data (only six warrants were listed on NYSE
American as of January 1, 2019, and warrants on both markets did not
trade on a large number of days) and other differences between the
exchanges in market structure and listing requirements, based on
this review, in Nasdaq's opinion, there was no evidence indicating
that trading quality in warrants listed on NYSE American under its
current listing standard was worse than those of warrants listed on
Nasdaq under its standard. Additionally, Nasdaq is unaware that NYSE
American has taken adverse action against a warrant or an issuer of
such warrant listed under Section 105 of the NYSE American Company
Guide based on the quantitative listing standards in question.
\6\ Nasdaq Rule 5005(a)(36) defines Public Holders as ``holders
of a security that includes both beneficial holders and holders of
record, but does not include any holder who is, either directly or
indirectly, an Executive Officer, director, or the beneficial holder
of more than 10% of the total shares outstanding.''
\7\ Nasdaq Rule 5005(a)(40) defines a Round Lot Holder as ``a
holder of a Normal Unit of Trading of Unrestricted Securities. The
number of beneficial holders will be considered in addition to
holders of record.''
\8\ The proposed Nasdaq requirement could be more stringent than
the NYSE American requirement because the Nasdaq rule would require
that the holders be both Public Holders and Round Lot Holders, and
would exclude holders of restricted securities, whereas the NYSE
American rule only requires that they be public holders.
\9\ Nasdaq notes that Section 105 of the NYSE American Company
Guide also provides requirements around warrant exercise provisions
when a company has the right to reduce the exercise price of its
warrants. Similar to these NYSE American requirements, Nasdaq
believes that its rules also require a company with such a right to
comply with any applicable tender offer regulatory provisions under
the federal securities laws and to publicly disclose material
information such as the reduction of the warrant exercise price.
Nasdaq intends to file a subsequent rule filing to provide
transparency to this.
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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 Section
6(b)(5) of the Act,\11\ 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. Specifically, Nasdaq believes this proposed rule change
removes an impediment to a free and open system by enabling Nasdaq to
compete with NYSE American for the listing of a broader scope of
warrants and simultaneously by offering issuers of such warrants an
additional listing option. Nasdaq further believes that it does so
without impacting the protection of investors or the public interest
because, in Nasdaq's opinion, the quantitative standards at issue have
been applied by NYSE American for many years without harm.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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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. To the contrary, the Exchange
believes the proposed rule change is pro-competitive in that it permits
competition for more issuers of warrants. Today, there is no such
competition because such issuers are not eligible for listing on
Nasdaq.
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)(iii) of the Act \12\ and Rule
19b-4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 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 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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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \14\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the Exchange may allow the issuer of a warrant currently affected by
the existing rule the opportunity to list on Nasdaq. The Exchange notes
that its proposal is based on an existing NYSE American rule and, in
its view, the proposal does not raise new issues that are inconsistent
with the protection of investors and the public interest.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiver of the operative delay is
appropriate because the proposed warrant holder
[[Page 69446]]
requirement is substantially similar to the rules of another national
securities exchange.\16\ For these reasons, the Commission believes
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest. Therefore, the
Commission hereby waives the operative delay and designates the
proposal as operative upon filing.\17\
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\16\ See also supra note 9.
\17\ For purposes only of waiving the 30-day operative delay,
the Commission also has 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. 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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2019-092 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-2019-092. 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 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-2019-092 and should be submitted
on or before January 8, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
\18\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-27212 Filed 12-17-19; 8:45 am]
BILLING CODE 8011-01-P