
[Federal Register Volume 81, Number 127 (Friday, July 1, 2016)]
[Notices]
[Pages 43327-43330]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15714]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78175; File No. SR-NASDAQ-2016-088]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Reduce the Fees for Certain Real Estate Investment Trusts Listed on 
Nasdaq

June 28, 2016.
    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 14, 2016, 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 reduce the fees for certain Real Estate 
Investment Trusts (``REITs'') listed on Nasdaq.
    The text of the proposed rule change is set forth below. Proposed 
new language is in italics; deleted text is in brackets.
* * * * *
IM-5910-1. All-Inclusive Annual Listing Fee

    (a)-(c) No change.
    (d) The All-Inclusive Annual Listing Fee will be calculated on 
total shares outstanding according to the following schedules:
    (1) All domestic and foreign Companies listing equity securities, 
except as described below:

Up to 10 million shares $45,000
10+ to 50 million shares $55,000
50+ to 75 million shares $75,000
75+ to 100 million shares $100,000
100+ to 125 million shares $125,000
125+ to 150 million shares $135,000
Over 150 million shares $155,000

    Real Estate Investment Trusts (REITs) are subject to the same fee 
schedule as other equity securities. For the purpose of determining the 
total shares outstanding, shares outstanding of all members in a REIT 
Family listed on the Nasdaq Global Market may be aggregated. The 
maximum annual fee applicable to such a REIT Family shall not exceed 
$155,000. For purposes of this rule, a ``REIT Family'' means three or 
more REITs that are provided management services by the same entity or 
by entities under common control.
    (2)-(3) No change.
    (e) No change.
* * * * *
IM-5920-1. All-Inclusive Annual Listing Fee
    (a)-(c) No change.
    (d) The All-Inclusive Annual Listing Fee will be calculated on 
total shares outstanding according to the following schedules:
    (1) All domestic and foreign Companies listing equity securities, 
except as described below:

Up to 10 million shares $42,000
10+ to 50 million shares $55,000
Over 50 million shares $75,000

    Real Estate Investment Trusts (REITs) are subject to the same fee 
schedule as other equity securities. For the purpose of determining the 
total shares outstanding, shares outstanding of all members in a REIT 
Family listed on the Nasdaq Capital Market may be aggregated. The 
maximum annual fee applicable to such a REIT Family shall not exceed 
$75,000. For purposes of this rule, a ``REIT Family'' means three or 
more REITs that are provided management services by the same entity or 
by entities under common control.
    (2)-(3) No change.
    (e) No change.
* * * * *

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

[[Page 43328]]

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 allow three or more REITs that are provided 
management services by the same entity or by entities under common 
control (a ``REIT Family'') to aggregate the shares outstanding of such 
REITs for the purpose of determining the annual fee payable to Nasdaq, 
thus lowering the fees paid by the REIT Family.\3\
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    \3\ REITs currently pay the same annual fees that apply to other 
equity securities.
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    Some publicly traded REITs have their operations externally managed 
by another entity pursuant to a management agreement. In such cases, 
the REIT itself does not have any employees. Rather, the external 
manager is entirely responsible for managing and staffing the 
operations of the company, in return for management fees. In a limited 
number of cases, a single entity or affiliated entities externally 
manage three or more REITs, thus forming a REIT Family.
    As an incentive for all of the REITs in such a group to list on 
Nasdaq, Nasdaq proposes to allow three or more REITs under common 
management to aggregate the shares outstanding of such REITs for the 
purpose of determining the annual fee payable to Nasdaq.\4\ Nasdaq 
believes that this will be attractive to management companies that 
externally manage multiple REITs as it will reduce the REITs' expenses 
and, therefore, increase the REITs' earnings available to shareholders.
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    \4\ For example, three REITs in a REIT Family, each having 55 
million total shares outstanding, listed on the Nasdaq Global 
Market, would be charged $75,000 each under the current All-
Inclusive Annual Listing Fee schedule for a total of $225,000. Under 
the proposed rule such REITs would be charged $155,000 in total, as 
one entity with 165 million total shares outstanding.
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    Nasdaq already allows the sponsor of a family of closed-end funds 
to aggregate the funds' shares outstanding in a similar manner.\5\ 
REITs are similar to closed-end funds in that they receive special tax 
treatment if they distribute most of their income each year. As a 
result, like closed-end funds, REITs are judged by investors, in large 
part, based upon the yield that they provide and REITs are therefore 
extremely fee sensitive.
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    \5\ See Securities Exchange Act Release No. 52277 (August 17, 
2005), 70 FR 49347 (August 23, 2005) (SR-NASD-2005-96).
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    The Exchange expects that the proposed fee change will incentivize 
external managers to encourage the boards of their managed REITs to 
avail themselves of the potential reduction in the annual fee and that 
it will therefore motivate eligible REITs to remain listed on Nasdaq or 
to transfer their listing to the Nasdaq.
    The proposed REIT fee structure would apply to both the Nasdaq 
Global Market and the Nasdaq Capital Market.\6\ REITs listed on the 
Nasdaq Global Market that are part of a REIT Family will be permitted 
to aggregate the shares outstanding of such REITs for the purpose of 
determining the annual fee, and such aggregated shares outstanding will 
be subject to the same fee schedule as a single REIT listed on the 
Nasdaq Global Market.
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    \6\ Listing Rule 5910 provides that fee schedules for the Nasdaq 
Global Select Market are the same as fee schedules for the Nasdaq 
Global Market.
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    Similarly, REITs listed on the Nasdaq Capital Market that are part 
of a REIT Family will be permitted to aggregate the shares outstanding 
of such REITs for the purpose of determining the annual fee, and such 
aggregated shares outstanding will be subject to the same fee schedule 
as a single REIT listed on the Nasdaq Capital Market.
    The proposed amendment will affect only the All-Inclusive Annual 
Listing Fee schedule. In 2014, Nasdaq adopted a new All-Inclusive 
Annual Listing Fee schedule and this new fee structure currently 
applies to all newly listing companies and will become operative for 
all listed companies in 2018.\7\ On June 10, 2016, Nasdaq filed a 
proposed rule change with the Commission to allow currently listed 
companies that are not on the All-Inclusive Annual Listing Fee schedule 
to opt-in for 2017.\8\ This will allow any currently listed REIT Family 
that would like to take advantage of this fee change to do so for their 
next annual fee.
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    \7\ Securities Exchange Act Release No. 73647 (November 19, 
2014), 79 FR 70232 (November 25, 2014) (SR-NASDAQ-2014-87).
    \8\ SR-NASDAQ-2016-085.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ 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 
or system which the Exchange operates or controls, and is not designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    As a preliminary matter, Nasdaq competes for listings with other 
national securities exchanges and companies can easily choose to list 
on, or transfer to, those alternative venues. As a result, the fees 
Nasdaq can charge listed companies are constrained by the fees charged 
by its competitors and Nasdaq cannot charge prices in a manner that 
would be unreasonable, inequitable, or unfairly discriminatory.
    Nasdaq believes that the proposed fee change allowing a REIT Family 
to aggregate shares, and pay a lower fee, is reasonable and not 
unfairly discriminatory because there is a reasonable justification for 
charging a REIT Family different fees from those charged to other 
issuers of equity securities.
    In particular, REITs are similar to closed-end funds in that they 
receive special tax treatment if they distribute most of their income 
each year. As a result, like closed-end funds, REITs are judged by 
investors, in large part, based upon the yield that they provide and 
are therefore extremely fee sensitive. For these reasons, it is not 
unfairly discriminatory to afford a REIT Family a similar fee benefit 
as afforded to a family of closed-end funds, even if such treatment 
differs from the treatment of operating companies.
    In addition, Nasdaq notes that a substantial portion of the 
regulatory cost it incurs in connection with the continued listing of 
an issuer relates to the review by Nasdaq staff of the issuer's 
compliance with Nasdaq's corporate governance requirements. Because the 
REITs in a REIT Family are provided management services by the same 
entity or by entities under common control, established rapport between 
REIT managers and Nasdaq staff allows Nasdaq to more efficiently 
monitor all members of a REIT Family.
    Nasdaq believes that allowing aggregation of shares outstanding for 
three or more REITs, rather than two or more REITs, managed by the same 
entity or entities under common control is not unfairly discriminatory. 
First, the benefits to Nasdaq described above are more pronounced when 
there are three or more REITs in the family. In addition, if 
aggregation is allowed for two REITs, it would lead to additional loss 
of revenue to Nasdaq. Finally, the proposed fee change is a competitive 
response to the discount allowed by NYSE, which is also available only 
to families of three or more REITs.\11\
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    \11\ In 2007, the New York Stock Exchange (``NYSE'') adopted a 
rule that provides for a discount in annual fees for three or more 
REITs sharing a common external manager. Securities Exchange Act 
Release No. 57061 (December 28, 2007), 73 FR 0902 (January 4, 2008) 
(SR-NYSE-2007-113). In an order approving the NYSE's discount the 
Commission found that ``it is reasonable for the Exchange to balance 
its need to remain competitive, while at the same time ensuring 
adequate revenue to meet is regulatory responsibilities.'' The 
Commission further found that the NYSE's proposed discount ``does 
not constitute an inequitable allocation of reasonable dues, fees, 
and other charges, does not permit unfair discrimination between 
issuers, and is generally consistent with the Act.'' See Securities 
Exchange Act Release No. 57291 (February 7, 2008), 73 FR 8387 
(February 13, 2008) (approving SR-NYSE-2007-113).

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[[Page 43329]]

    Nasdaq also notes that no other company will be required to pay 
higher fees as a result of the proposed amendments. Therefore, Nasdaq 
believes that allowing a REIT Family to aggregate the shares 
outstanding of all REITs that are part of the REIT Family is reasonable 
and not inequitable or unfairly discriminatory.
    Finally, Nasdaq believes that the proposed fees are consistent with 
the investor protection objectives of Section 6(b)(5) of the Act \12\ 
in that they are designed to promote just and equitable principles of 
trade, to remove impediments to a free and open market and national 
market system, and in general to protect investors and the public 
interest.
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    \12\ 15 U.S.C. 78f(b)(5).
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    Specifically, the amount of revenue forgone by allowing REIT 
Families to aggregate shares outstanding when calculating fees is not 
substantial, and the reduced fees may result in more REITs listing on 
Nasdaq, thereby increasing the resources available for Nasdaq's listing 
compliance program, which helps to assure that listing standards are 
properly enforced and investors are protected.
    Consequently, Nasdaq believes that the potential loss of revenue 
from the aggregation of shares outstanding in a REIT Family, as 
proposed, will not hinder its ability to fulfill its regulatory 
responsibilities.

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. The market for 
listing services is extremely competitive and listed companies may 
freely choose alternative venues based on the aggregate fees assessed 
and the value provided by each listing. This rule proposal does not 
burden competition with other listing venues, which are similarly free 
to set their fees.\13\ For these reasons, Nasdaq does not believe that 
the proposed rule change will result in any burden on competition for 
listings.
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    \13\ See footnote 11 above.
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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, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\14\ and Rule 19b-4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intention 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 under Rule 19b-4(f)(6) normally does 
not become operative for 30 days from the date of filing. However, Rule 
19b-4(f)(6)(iii) \16\ 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 REITs have an incentive to list on the 
Exchange sooner, which additional time the Exchange states will help to 
prevent potential disruptions to listing REITs that are part of a REIT 
Family and thereby enhance competition. Based on the foregoing, the 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest for 
the same reasons stated by the Exchange.\17\ The Commission hereby 
waives the 30-day operative delay and designates the proposed rule 
change to be operative upon filing with the Commission. 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.
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    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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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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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2016-088 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-2016-088. 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 Web site (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 Web site 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 will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2016-088 and should 
be submitted on or before July 22, 2016.


[[Page 43330]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-15714 Filed 6-30-16; 8:45 am]
 BILLING CODE 8011-01-P


