
[Federal Register Volume 88, Number 179 (Monday, September 18, 2023)]
[Notices]
[Pages 64016-64019]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20087]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98367; File No. SR-NASDAQ-2023-017]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order 
Granting Approval of a Proposed Rule Change To Modify the Package of 
Complimentary Services Provided to Certain Eligible Switches September 
12, 2023 and Make Other Changes to IM-5900-7 and IM-5900-7A

September 12, 2023.

I. Introduction

    On June 21, 2023, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934

[[Page 64017]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
modify the package of complimentary services provided to eligible 
companies and make other changes to Nasdaq Rules IM-5900-7 and IM-5900-
7A. The proposed rule change was published for comment in the Federal 
Register on July 10, 2023.\3\ On August 21, 2023, the Commission 
extended the time period within which to approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to approve or disapprove the proposed rule change 
to October 8, 2023.\4\ The Commission did not receive any comments. As 
discussed further below, the Commission is approving the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 97833 (July 3, 
2023), 88 FR 43637 (``Notice'').
    \4\ See Securities Exchange Act Release No. 98172 (August 25, 
2023), 88 FR 58341.
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II. Description of the Proposal

    The Exchange proposes to modify the package of complimentary 
services provided to certain Eligible Switches,\5\ to update the values 
of complimentary services provided under Nasdaq Rules IM-5900-7 and IM-
5900-7A, and to remove obsolete provisions from Nasdaq Rule IM-5900-7A.
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    \5\ IM-5900-7 defines an Eligible Switch as ``a Company: (i) 
(other than a Company listed under IM-5101-2) switching its listing 
from the New York Stock Exchange to the Global or Global Select 
Markets, or (ii) that has switched its listing from the New York 
Stock Exchange and listed on Nasdaq under IM-5101-2 after the 
Company publicly announced that it entered into a binding agreement 
for a business combination and that subsequently satisfies the 
conditions in IM-5101-2(b) and lists on the Global or Global Select 
Market in conjunction with that business combination.''
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    Currently, Nasdaq offers complimentary services under Nasdaq Rule 
IM-5900-7 to Eligible New Listings \6\ and Eligible Switches \7\ newly 
listing on Nasdaq's Global or Global Select Market (collectively, 
``Eligible Companies'').\8\ The services offered include a 
whistleblower hotline, investor relations website, disclosure services 
for earnings or other press releases, webcasting, market analytic 
tools, environmental, social and governance (``ESG'') services, and may 
include market advisory tools such as stock surveillance (collectively 
the ``Service Package'').\9\ For Eligible New Listings, Nasdaq offers 
different tiers of complimentary services packages based upon whether 
the company has a market capitalization of (1) less than $750 million 
or (2) $750 million or more.\10\ For Eligible Switches, Nasdaq offers 
different tiers of complimentary services packages based upon whether 
the company has a market capitalization of (i) less than $750 million; 
(ii) $750 million or more but less than $5 billion; or (iii) $5 billion 
or more.\11\ Nasdaq states that it believes that the complimentary 
service program offers valuable services to newly listing companies, is 
designed to help ease the transition of becoming a public company or 
switching markets, and makes listing on Nasdaq more attractive to these 
companies.\12\ According to Nasdaq, it faces competition in the market 
for listing services and believes that it is reasonable to offer 
complimentary services to attract and retain listings as part of this 
competition.\13\
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    \6\ IM-5900-7 defines an Eligible New Listing as ``a Company 
listing on the Global or Global Select Market in connection with: 
(i) an initial public offering in the United States, including 
American Depository Receipts (other than a Company listed under IM-
5101-2), (ii) upon emerging from bankruptcy, (iii) in connection 
with a spin-off or carve-out from another Company, (iv) in 
connection with a Direct Listing as defined in IM-5315-1 (including 
the listing of American Depository Receipts), or (v) in conjunction 
with a business combination that satisfies the conditions in IM-
5101-2(b).''
    \7\ See supra note 5.
    \8\ See IM-5900-7A (describing the Service Package available to 
companies that listed before March 12, 2021, the effective date of 
SR-NASDAQ-2021-002). See also Securities Exchange Act Release No. 
91318 (March 12, 2021), 86 FR 14774 (March 18, 2021) (SR-NASDAQ-
2021-002) (modifying the package of complimentary services provided 
to eligible companies and setting forth in IM-5900-7A the services 
offered to eligible companies that listed before the effective date 
of the change).
    \9\ According to Nasdaq, in addition, all companies listed on 
Nasdaq receive other standard services from Nasdaq, including Nasdaq 
Online and the Market Intelligence Desk. See Notice, supra note 3, 
at 43637, n.6.
    \10\ See IM-5900-7(c) for additional detail about the types of 
complimentary services and length of the complimentary services 
period offered to each tier of Eligible New Listings.
    \11\ See IM-5900-7(d) for additional detail about the types of 
complimentary services and length of the complimentary services 
period offered to each tier of Eligible Switches.
    \12\ See Notice, supra note 3 at 43637.
    \13\ See id. at 43638. Nasdaq further states that all similarly 
situated companies are eligible for the same package of services. 
Id. at 43638.
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    Nasdaq proposes to modify the ESG services available to Eligible 
Switches with a market capitalization of $5 billion or more that list 
on or after the date of the Commission's approval of the proposed rule 
change.\14\ Nasdaq states that, based on Nasdaq's experience since 
first including the ESG services in the Service Package for all 
Eligible Companies in 2021,\15\ Nasdaq has become aware that as 
companies mature and become larger, they no longer rely on services 
like the Core ESG software solution, but instead need more 
sophisticated programs with additional metrics.\16\ Nasdaq states that 
the Core ESG software solution is not valuable to these larger seasoned 
companies and Nasdaq proposes to instead offer Eligible Switches with a 
market capitalization of $5 billion or more an advanced software 
solution, which will enable the company to select additional metrics to 
use in the solution (``Advanced ESG Software Solution'').\17\ Nasdaq 
states that the Advanced ESG Software Solution will allow the company 
to track approximately ten times as many standard performance 
indicators and also allows the company to select and track additional 
custom performance indicators.\18\ Further, Nasdaq states that it will 
offer these companies $60,000 worth of ESG consulting services per year 
(``ESG Advisory Services'') (collectively with Advanced ESG Software 
Solution, ``Advanced ESG Services'').\19\ According to Nasdaq, it 
believes that offering different ESG services based on a company's 
market capitalization is not unfairly discriminatory because larger 
companies generally will need more and different ESG services, and that 
those issuers will likely bring greater future

[[Page 64018]]

value to Nasdaq than will other issuers by switching to its market.\20\
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    \14\ See proposed IM-5900-7(d)(3)(A). Nasdaq also proposes to 
add a new paragraph to IM-5900-7(d)(3)(B) that sets forth the ESG 
services provided to an Eligible Switch with a market capitalization 
of $5 billion or more that listed before the effective date of the 
proposal. Specifically, proposed IM-5900-7(d)(3)(B) states: ``an 
Eligible Switch that listed before [the effective date of SR-NASDAQ-
2023-017] and had a market capitalization of $5 billion or more is 
not eligible to receive the Advanced ESG Service or ESG Advisory 
Services, but instead receives the Core ESG Software Solution for 
four years. The total retail value of these services is up to 
approximately $281,200 per year. The Company will also receive one 
Virtual Event during the four-year period, which has a retail value 
of approximately $11,700.''
    \15\ See supra note 8. All Eligible Companies receive access to 
a Core ESG software solution. This service is currently called ``ESG 
Core'' in IM-5900-7. Nasdaq proposes to make a technical change to 
rename the service to ``Core ESG Software Solution.'' No other 
changes are proposed to the service.
    \16\ See Notice, supra note 3 at 43637.
    \17\ See id. Nasdaq states this service has a retail value of 
approximately $52,500 per year. See id. at n. 10. In addition, one-
time development fees of up to $21,500 to establish the services in 
the first year will be waived. See id. at n. 10. According to 
Nasdaq, the total one-time development fees that are waived for 
Eligible Companies that receive this service, as reflected in 
proposed IM-5900-7(d)(3)(A) is approximately $26,500, which also 
includes approximately $5,000 to establish the investor relations 
website. See id. at n. 10.
    \18\ See id. at 43637.
    \19\ See id. Nasdaq states that these services are designed to 
aid the company in identifying and incorporating ESG metrics into 
communications, with customized analysis and recommendations. See 
id.
    \20\ See id. at 43639. Nasdaq also states that such companies 
would more likely forego ESG services offered by their current 
exchange when switching their listing to Nasdaq, which smaller 
companies would not. See id. See also Securities Exchange Act 
Release No. 94222 (February 10, 2022), 87 FR 8886 (February 16, 
2022) (SR-NYSE-2021-68) (approving changes to NYSE Listed Company 
Manual Section 907.00, including the offer of ESG tools to currently 
listed companies with 270 million or more total shares of common 
stock outstanding, but not to companies with fewer shares 
outstanding).
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    Further, each of these services will be available to Eligible 
Switches with a market capitalization of $5 billion or more for the 
same four-year term provided for other services to such category of 
Eligible Switches under Nasdaq Rule IM-5900-7.\21\ Nasdaq states that 
no company is required to use these services as a condition of listing 
and, as is the case with other complimentary services, at the end of 
the package term, companies may choose to renew these services or 
discontinue them.\22\
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    \21\ See Notice, supra note 3 at 43637-38.
    \22\ See id. at 43637.
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    Nasdaq also proposes to update the values of the services contained 
in Nasdaq Rules IM-5900-7 and IM-5900-7A to their current values.\23\ 
According to Nasdaq, depending on a company's market capitalization and 
whether it is an Eligible New Listing or an Eligible Switch, the total 
revised value of the services provided to Eligible Companies (including 
the waiver of one-time fees) ranges from $364,800 to $1,533,000.\24\
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    \23\ Nasdaq states that these services are offered through 
Nasdaq Corporate Solutions, LLC, an affiliate of Nasdaq, or a third-
party provider selected by Nasdaq. See id. at 43638.
    \24\ See id. The exact values are set forth in proposed IM-5900-
7 and IM-5900-7A. Nasdaq states that, in describing the total value 
of the services for companies that can select more than one market 
advisory tool, Nasdaq presumes that a company would use stock 
surveillance, which has an approximate retail value of $56,500, and 
global targeting, which has an approximate retail value of $48,000. 
See id. Nasdaq states that companies could select different 
combinations of the three services offered with lower total 
approximate retail values. See id.
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    Finally, Nasdaq proposes to simplify Nasdaq Rule IM-5900-7A by 
cross-referencing the description of services and their values that 
also appears in Nasdaq Rule IM-5900-7 and by deleting the descriptions 
of offerings that are no longer available to any companies.\25\ Nasdaq 
represents that no other company will be required to pay higher fees as 
a result of the proposed amendments and that providing this service 
will have no impact on the resources available for its regulatory 
programs.\26\
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    \25\ As to the description of offerings being deleted from IM-
5900-7A, Nasdaq states that the services described in IM-5900-7A(c) 
and (d)(1) were provided for a term of two years to companies that 
listed before March 12, 2021. See id. at n. 13. Additionally, Nasdaq 
states that no company still receives the services described in IM-
5900-7A(g), which applies only to companies that listed before April 
23, 2018. See id. Nasdaq also proposes to revise the title of IM-
5900-7 to specify that the rule specifies the services offered to 
certain newly listing companies listed on or after March 12, 2021. 
See also supra note 14 and accompanying text.
    \26\ See id. at 43638. Nasdaq also represents that the proposed 
rule change will help ensure that individual listed companies are 
not given specially negotiated packages of products or services to 
list, or remain listed. See id.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent Section 6 of the Act.\27\ Specifically, the 
Commission finds that the proposed rule change is consistent with 
Sections 6(b)(4) and (5) of the Act,\28\ in particular, in that it is 
designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among Exchange members, issuers, and other 
persons using the Exchange's facilities, and, in general to protect 
investors and the public interest and is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers. 
Moreover, the Commission believes that the proposed rule change is 
consistent with Section 6(b)(8) of the Act,\29\ in that it does not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
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    \27\ 15 U.S.C. 78f(b). In approving this proposed rule change, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \28\ 15 U.S.C. 78f(b)(4) and (5).
    \29\ 15 U.S.C. 78f(b)(8).
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    The Commission believes that Nasdaq is responding to competitive 
pressures in the market for listings in making this proposal. Nasdaq 
states in its proposal that it faces competition in the market for 
listing services and that it competes, in part, by offering 
complimentary services to companies.\30\ Specifically, Nasdaq is 
increasing the types of complimentary ESG services offered for certain 
Eligible Switches that list on or after the effective date of the 
proposed rule change. Nasdaq states that the Advanced ESG Services will 
help eligible companies communicate with their shareholders and other 
stakeholders by helping collect, store and disclose ESG data chosen by 
the company and guiding messaging and reporting of that 
information.\31\ Nasdaq also states that the services will help assess 
the company's current ESG program, identify ESG risk and opportunities, 
and establish strategies for risk management and opportunity 
capture.\32\ In addition, Nasdaq states that no company is required to 
use these complimentary services.\33\ Further, Nasdaq states that 
offering different ESG services based on a company's market 
capitalization is not unfairly discriminatory because larger companies 
generally will need more and different ESG services and that those 
issuers will likely bring greater future value to Nasdaq than other 
issuers by switching to its market.\34\
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    \30\ See Notice, supra note 3, at 43638.
    \31\ See id.
    \32\ See id.
    \33\ See id. at 43637.
    \34\ See id. at 43639. The Exchange also states that companies 
would more likely forego ESG services offered by their current 
exchange given that NYSE offers ESG tools to currently listed 
companies with 270 million or more total shares of common stock 
outstanding, but not to companies with fewer shares outstanding. See 
id. at 43638. See also NYSE Listed Company Manual Section 907.00.
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    As stated in the Commission's previous order approving Nasdaq Rule 
IM-5900-7, Section 6(b)(5) of the Act does not require that all issuers 
be treated the same; rather, the Act requires that the rules of an 
exchange not unfairly discriminate between issuers.\35\ As the 
Commission has previously found, it is reasonable for Nasdaq to provide 
different services to tiers based on market capitalization since larger 
capitalized companies generally will need and use more services.\36\ 
The Commission believes that it is reasonable and consistent with 
Section 6(b)(5) of the Act for the Exchange to offer the new Advanced 
ESG Services to Eligible Switches with a market

[[Page 64019]]

capitalization of $5 billion or more that list on or after the date of 
approval of the proposed rule change. For the reasons stated above, the 
Commission also believes that the proposal does not unfairly 
discriminate among issuers and is therefore consistent with Section 
6(b)(5) of the Act. In addition, the Commission believes that the 
proposed rule reflects the current competitive environment for exchange 
listings among national securities exchanges, and is appropriate and 
consistent with Section 6(b)(8) of the Act.\37\
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    \35\ 15 U.S.C. 78f(b)(5); see also Securities Exchange Act 
Release No. 65963 (December 15, 2011), 76 FR 79262, 79266 (December 
21, 2011) (approving SR-NASDAQ-2011-122) (``2011 Approval Order'') 
(``The Commission believes that Nasdaq has provided a sufficient 
basis for its different treatment of Eligible Switches and that this 
portion of Nasdaq's proposal meets the requirements of the Act in 
that it reflects competition between exchanges, with Nasdaq offering 
discounts for transfers of listings from a competing exchange.''). 
See also Exchange Act Release No. 79366 (November 21, 2016), 81 FR 
85663, 85665 (November 28, 2016) (approving SR-NASDAQ-2016-106) 
(``2016 Approval Order'') (citing Securities Exchange Act Release 
No. 65127 (August 12, 2011), 76 FR 51449, 51452 (August 18, 2011) 
(approving SR-NYSE-2011-20) (``NYSE Approval Order'')).
    \36\ See 2011 Approval Order, supra note 35, at 79266. As the 
Commission previously stated, Nasdaq's rationale for treating NYSE 
transfers differently from other types of transfers, including that 
those issuers provided greater future value to Nasdaq through their 
listing than do other issuers and that the issuers must forego 
similar services provided by NYSE, among other factors, justified 
such differential treatment. See id. As stated above Nasdaq, 
provided similar rationale for only providing the Advanced ESG 
Services to Eligible Switches with a market capitalization of $5 
billion or more.
    \37\ 15 U.S.C. 78f(b)(8).
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    Further, the Commission believes that describing in the Exchange's 
rules the products and services available to Eligible Companies and 
their associated values, as well as the length of time companies are 
entitled to receive such services, will ensure that individual listed 
companies are not given specially negotiated packages of products or 
services to list, or remain listed, that would raise unfair 
discrimination issues under the Act.\38\ The Commission has previously 
found that the package of complimentary services offered to Eligible 
Companies is equitably allocated among issuers consistent with Section 
6(b)(4) of the Act and that describing the values of the services adds 
greater transparency to the Exchange's rules and to the fees applicable 
to such companies.\39\ As discussed above, the Commission believes that 
adding the Advanced ESG Services to the complimentary services package 
offered to Eligible Switches with a market capitalization of $5 billion 
or more for Eligible Switches that list on or after the effective date 
of the proposed rule change is consistent with Section 6(b)(5) of the 
Act. As stated above, the Commission also believes that the proposal 
does not unfairly discriminate among issuers and is therefore 
consistent with Section 6(b)(5) of the Act. For similar reasons, the 
Commission believes that the packages of complimentary services to be 
offered pursuant to Nasdaq's proposal are equitably allocated among 
issuers consistent with Section 6(b)(4) of the Act.
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    \38\ See 2016 Approval Order, supra note 35, at 85665 (citing 
NYSE Approval Order, supra note 35, at 51452). The Commission notes 
that Nasdaq represents that no other company will be required to pay 
higher fees as a result of the proposal, that the proposal will have 
no impact on the resources available for its regulatory programs, 
and that the proposal will help to ensure that individual listed 
companies are not given specially negotiated packages of products or 
services to list, or remain listed. See supra note 26 and 
accompanying text.
    \39\ See 2016 Approval Order, supra note 35, at 85665; 2011 
Approval Order, supra note 35, at 79266.
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    The Commission also believes that it is reasonable, and required by 
Section 19(b) of the Act,\40\ that Nasdaq amend its rules to update the 
products and services it offers to Eligible Companies contained in 
Nasdaq Rules IM-5900-7 and IM-5900-7A, including the time periods for 
which such products and services are offered and the commercial value 
of such products and services. This provides greater transparency to 
the Exchange's rules and the fees, and the value of complementary 
products and services, applicable to Eligible Companies.
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    \40\ See Exchange Act Release No. 72669 (July 24, 2014), 79 FR 
44234, 44236, n.39 (July 30, 2014) (SR-NASDAQ-2014-058) (``We would 
expect Nasdaq, consistent with Section 19(b) of the Exchange Act, to 
periodically update the retail values of services offered should 
they change. This will help to provide transparency to listed 
companies on the value of the free services they receive and the 
actual costs associated with listing on Nasdaq.'').
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    Finally, the Commission finds that it is consistent with Section 
6(b)(5) of the Act \41\ for Nasdaq to make various technical and 
conforming revisions, as described above,\42\ to facilitate clarity of 
its rules.
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    \41\ 15 U.S.C. 78f(b)(5).
    \42\ See supra note 25 and accompanying text.
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    Conclusion
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\43\ that the proposed rule change (SR-NASDAQ-2023-017) be, and it 
hereby is, approved.
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    \43\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\44\
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    \44\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20087 Filed 9-15-23; 8:45 am]
BILLING CODE 8011-01-P


