[Federal Register Volume 84, Number 174 (Monday, September 9, 2019)]
[Notices]
[Pages 47334-47336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19334]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86857; File No. SR-NASDAQ-2019-066]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Clarify Rule 4120(c)(9)

September 3, 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 August 21, 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 clarify Rule 4120(c)(9) without changing 
its substance.
    The text of the proposed rule change is set forth below. Proposed 
new language is italicized; deleted text is in brackets.
* * * * *

The Nasdaq Stock Market Rules

* * * * *

4120. Limit Up-Limit Down Plan and Trading Halts

    (a)-(b) No change.
    (c) Procedure for Initiating and Terminating a Trading Halt
    (1)-(8) No change.
    (9) For purposes of this Rule and Rule 4753, the process for 
halting and initial pricing of a security that is the subject of an 
initial public offering shall also be available for the initial pricing 
of any other security that has not been listed

[[Page 47335]]

on a national securities exchange or traded in the over-the-counter 
market pursuant to FINRA Form 211 immediately prior to the initial 
pricing, provided that a broker-dealer serving in the role of financial 
advisor to the issuer of the securities being listed is willing to 
perform the functions under Rule 4120(c)(8) that are performed by an 
underwriter with respect to an initial public offering. If more than 
one broker-dealer is serving in the role of financial advisor, the 
issuer must designate one to perform the functions under Rule 
4120(c)(8).
    (10) No change.
* * * * *
    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 proposes to amend Rule 4120(c)(9) to clarify that, if more 
than one broker-dealer is serving in the role of financial advisor to 
the issuer, in order to use the Nasdaq IPO Cross, as defined below, to 
initiate trading in securities that have not been listed on a national 
securities exchange or traded in the over-the-counter market pursuant 
to FINRA Form 211 immediately prior to the initial pricing, the issuer 
must designate one financial advisor to perform the functions under 
Rule 4120(c)(8).\3\
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    \3\ On July 18, 2019, Nasdaq submitted a proposed rule change to 
amend 4120(c)(9). The effect of that rule change, if approved by the 
Commission, will be to make certain additional companies eligible to 
use the IPO Cross. See Securities Exchange Act Release No. 86537 
(July 31, 2019), 84 FR 38321 (August 6, 2019) (SR-NASDAQ-2019-060).
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    In 2014, Nasdaq first adopted rules to allow the use of the Nasdaq 
IPO Cross to initiate trading in securities that have not been listed 
on a national securities exchange or traded in the over-the-counter 
market pursuant to FINRA Form 211 immediately prior to the initial 
pricing and described the role of financial advisors in that 
process.\4\ At that time, the Exchange added new Rule 4120(c)(9) \5\ to 
set forth the process by which trading commences in such securities. 
Under that rule, securities of companies that have not previously been 
listed on a national securities exchange or traded in the over-the-
counter market pursuant to FINRA Form 211 immediately prior to listing 
on Nasdaq can be launched for trading using the same crossing mechanism 
available for IPOs outlined in Rule 4120(c)(8) and Rule 4753 (the ``IPO 
Cross''). Prior to that rule change, securities of companies that were 
not conducting IPOs were released using the Halt Cross outlined in Rule 
4120(c)(7), which differed from the IPO Cross.\6\
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    \4\ Securities Exchange Act Release No. 71931 (April 11, 2014), 
79 FR 21829 (April 17, 2014) (SR-NASDAQ-2014-032) (the ``2014 Rule 
Change'').
    \5\ In 2014, Nasdaq filed SR-NASDAQ-2014-081 modifying the 
functions that are performed by an underwriter with respect to an 
initial public offering and renumbered certain paragraphs of Rule 
4120. Securities Exchange Act Release No. 73399 (October 21, 2014), 
79 FR 63981 (October 27, 2014) (approving SR-NASDAQ-2014-081). All 
references in this filing are to the renumbered rules, as currently 
in effect.
    \6\ The Halt Cross process has a shorter quoting period (five 
minutes) and provides no ability to extend the quoting period in the 
event trading interest or volatility in the market appears likely to 
have a material impact on the security, unless there is an order 
imbalance as defined in the rule. See the 2014 Rule Change for 
additional details on the differences between the Halt Cross and the 
IPO Cross.
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    The 2014 Rule Change extended the safeguards contained in the IPO 
Cross to securities that have not been listed on a national securities 
exchange or traded in the over-the-counter market pursuant to FINRA 
Form 211 immediately prior to the initial pricing and established that 
a broker-dealer serving in the role of financial advisor to the issuer 
could serve in the same capacity for such securities as the underwriter 
does for IPOs. Specifically, Rule 4120(c)(9) provides that the IPO 
Cross process described in Rules 4120 and 4753 is available to 
securities that have not been listed on a national securities exchange 
or traded in the over-the-counter market pursuant to FINRA Form 211 
immediately prior to the initial pricing where ``a broker-dealer 
serving in the role of financial advisor to the issuer of the 
securities being listed is willing to perform the functions under Rule 
4120(c)(8) that are performed by an underwriter with respect to an 
initial public offering.'' \7\
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    \7\ Subsequent to the 2014 Rule Change Nasdaq expanded and 
elaborated the functions that are performed by an underwriter with 
respect to an initial public offering. See footnote 6, above. Rule 
4120(c)(9) requires a broker-dealer serving in the role of a 
financial advisor to the issuer of the securities being listed to 
perform all such functions in order for the issuer to utilize the 
IPO Cross for the initial pricing of the security.
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    Rule 4120(c)(8) implies that only one underwriter performs the 
functions the rule describes. Typically, such functions are performed 
by the lead underwriter, which is referred to as ``the'' underwriter in 
the rule.
    Similarly, Nasdaq proposes to clarify that, if more than one 
broker-dealer is serving in the role of financial advisor to the 
issuer, in order to use the Nasdaq IPO Cross to initiate trading in 
securities that have not been listed on a national securities exchange 
or traded in the over-the-counter market pursuant to FINRA Form 211 
immediately prior to the initial pricing, the issuer must designate one 
financial advisor to perform the functions under Rule 4120(c)(8).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    Nasdaq believes that additional clarity that the issuer must 
designate one financial advisor to perform the functions under Rule 
4120(c)(8) will promote fair and orderly markets by eliminating 
potential confusion and by continuing to protect against volatility in 
the pricing and initial trading of the unseasoned securities covered by 
the proposed rule change.

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. The proposed change is designed 
to more clearly describe the current operation of an existing rule 
without changing its substance and, therefore, Nasdaq believes that the 
proposed change will not impose a burden on competition.

[[Page 47336]]

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) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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, along 
with a brief description and text of 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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    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 change 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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2019-066 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-2019-066. 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 
20549-1090 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-2019-066 and should 
be submitted on or before September 30, 2019.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19334 Filed 9-6-19; 8:45 am]
BILLING CODE 8011-01-P


