[Federal Register Volume 87, Number 183 (Thursday, September 22, 2022)]
[Notices]
[Pages 57951-57960]
[FR Doc No: 2022-20503]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95811; File No. SR-NASDAQ-2022-027]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change, as Modified by Amendment No.
2, To Modify Certain Pricing Limitations for Companies Listing in
Connection With a Direct Listing With a Capital Raise

September 16, 2022.
    On March 21, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to allow companies to modify certain pricing
limitations for companies listing in connection with a Direct Listing
with a Capital Raise in which the company will sell shares itself in
the opening auction on the first day of trading on Nasdaq. The proposed
rule change was published for comment in the Federal Register on April
8, 2022.\3\ On May 19, 2022, pursuant to Section 19(b)(2) of the
Act,\4\ the Commission designated a longer period within which to
either approve or disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\
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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. 94592 (April 4,
2022), 87 FR 20905 (April 8, 2022).
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 94947 (May 19,
2022), 87 FR 31915 (May 25, 2022). The Commission designated July 7,
2022, as the date by which it should approve, disapprove, or
institute proceedings to determine whether to disapprove the
proposed rule change.
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    On May 23, 2022, the Exchange filed Amendment No. 1 to the proposed
rule change, which superseded the proposed rule change as originally
filed. Amendment No. 1 was published for comment in the Federal
Register on June 2, 2022.\6\ On July 7, 2022, the Commission instituted
proceedings under Section 19(b)(2)(B) of the Act \7\ to determine
whether to approve or disapprove the proposed rule change.\8\
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    \6\ See Securities Exchange Act Release No. 94989 (May 26,
2022), 87 FR 33558 (June 2, 2022).
    \7\ 15 U.S.C. 78s(b)(2)(B).
    \8\ See Securities Exchange Act Release No. 95220 (July 7,
2022), 87 FR 41780 (July 13, 2022). Comments received on the
proposal are available on the Commission's website at: https://www.sec.gov/comments/sr-nasdaq-2022-027/srnasdaq2022027.htm.
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    On May 23, 2022, the Exchange filed Amendment No. 1 to the proposed
rule change, which superseded the proposed rule change as originally
filed. Amendment No. 1 to the proposed rule change is 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, as modified by Amendment No. 1, from interested
persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to modify certain pricing limitations for

companies listing in connection with a Direct Listing with a Capital
Raise on the Nasdaq Global Select Market in which the company will sell
shares itself in the opening auction on the first day of trading on
Nasdaq. This Amendment No. 2 supersedes the original filing, as
modified by Amendment No. 1, in its entirety.
    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 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 is filing this amendment to SR-NASDAQ-2022-027 \9\ to
address the issues the Commission raised in the OIP and make other
modifications to clarify the proposed rule language. This Amendment No.
2 supersedes and replaces Amendment No. 1 in its entirety.
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    \9\ Securities Exchange Act Release No. 94592 (April 4, 2022),
87 FR 20905 (April 8, 2022) (the ``Initial Proposal''). On May 23,
2022, the Exchange filed Amendment No. 1 to the proposed rule
change, which superseded the proposed rule change as originally
filed. Securities Exchange Act Release No. 94989 (May 26, 2022), 87
FR 33558 (June 2, 2022). The Commission issued an Order Instituting
Proceedings to Determine Whether To Approve or Disapprove the
Initial Proposal, as modified by Amendment No. 1. See Securities
Exchange Act Release No. 95220 (July 7, 2022), 87 FR 41780 (July 13,
2022) (the ``OIP'').
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    In this Amendment No. 2 (the ``Amendment'') Nasdaq proposes to
modify the Initial Proposal, as modified by Amendment No. 1,\10\ to
require that a company offering securities for sale in connection with
a Direct Listing with a Capital Raise must retain an underwriter with
respect to the primary sales of shares by the company and identify the
underwriter in its effective registration statement.\11\
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    \10\ Nasdaq submitted Amendment No. 1 in order to: (i) clarify
Nasdaq's view of the applicability of Securities Act Rule 430A and
mechanics of complying with the disclosures required under federal
securities laws by a company listing in connection with a Direct
Listing with a Capital Raise in circumstances where the actual price
calculated by the Cross is outside of the price range established by
the issuer in its effective registration statement; (ii) specify
that if the company's certification to Nasdaq (that the company does
not expect that an offering price above the price range would
materially change the company's previous disclosure in its effective
registration statement) includes an upside limit, Nasdaq will not
execute the cross if it results in an offering price above such
limit; and (iii) make minor technical changes to improve the
structure, clarity and readability of the proposed rules.
    \11\ Nasdaq believes that this proposal addresses the issues
raised by the Commission in the OIP related to the potential lack of
a named underwriter in a Direct Listing with a Capital Raise, as
explained below. Nasdaq also believes that this proposal addresses
concerns raised in the comment letter submitted by the Council of
Institutional Investors (CII), dated August 8, 2022. Nasdaq believes
that the CII letter raises concerns that are substantively the same
as the concerns raised by the Commission in the OIP.
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    Also in this Amendment, Nasdaq proposes to modify the Pricing Range
Limitation, as defined below, such that, provided other requirements
are satisfied, a Direct Listing with a Capital Raise can be executed in
the Cross at a price that is above the highest price of the price range
established by the issuer in its effective registration statement only
if the execution price is at or below the price that is 80% above the
highest price of the price range.\12\
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    \12\ Nasdaq believes that this proposal addresses the issues
raised by the Commission in the OIP related to the usefulness and
reliability of price range disclosure provided to investors, as
explained below.
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Description of Proposed Rule, as Amended
    In 2021, Nasdaq adopted Listing Rule IM-5315-2 to permit a company
to list on the Nasdaq Global Select Market in connection with a primary
offering in which the company will sell shares itself in the opening
auction on the first day of trading on the Exchange (a ``Direct Listing
with a Capital Raise''); \13\ created a new order type (the ``CDL
Order''), which is used during the Nasdaq Halt Cross (the ``Cross'')
for the shares offered by the company in a Direct Listing with a
Capital Raise; and established requirements for disseminating
information, establishing the opening price and initiating trading
through the Cross in a Direct Listing with a Capital Raise.\14\ For a
Direct Listing with a Capital Raise, Nasdaq rules currently require
that the actual price calculated by the Cross be at or above the lowest
price and at or below the highest price of the price range established
by the issuer in its effective registration statement (the ``Pricing
Range Limitation'').
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    \13\ A Direct Listing with a Capital Raise includes situations
where either: (i) only the company itself is selling shares in the
opening auction on the first day of trading; or (ii) the company is
selling shares and selling shareholders may also sell shares in such
opening auction.
    \14\ See Securities Exchange Act Release No. 91947 (May 19,
2021), 86 FR 28169 (May 25, 2021) (the ``Approval Order'').
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    Nasdaq now proposes to modify the Pricing Range Limitation \15\
such that, provided other requirements are satisfied, a Direct Listing
with a Capital Raise can also be executed in the Cross at a price that
is at or above the price that is as low as 20% below the lowest price
in the price range established by the issuer in its effective
registration statement; \16\ or at a price above the highest price of
such price range but only if the execution price is at or below the
price that is 80% above the highest price of the price range.
Specifically, to execute at a price outside of the price range, the
company's registration statement must contain a sensitivity analysis
explaining how the company's plans would change if the actual proceeds
from the offering were less than or exceeded the amount assumed in such
price range and the company has publicly disclosed and certified to
Nasdaq that the company does not expect that such price would
materially change the company's previous disclosure in its effective
registration statement. Nasdaq also proposes to make related conforming
changes.
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    \15\ On February 24, 2022, the Commission issued an order
disapproving a similar proposal by Nasdaq. Securities Exchange Act
Release No. 94311 (February 24, 2022), 87 FR 11780 (March 2, 2022)
(the ``Disapproval Order''). Nasdaq believes that this proposal
addresses the issues raised by the Commission in the Disapproval
Order.
    \16\ References in this proposal to the price range established
by the issuer in its effective registration statement are to the
price range disclosed in the prospectus in such registration
statement. Separately, as explained in more details below, Nasdaq
proposes to prescribe that the 20% threshold below the lowest price
in the price range will be calculated based on the maximum offering
price set forth in the registration fee table, consistent with the
Instruction to paragraph (a) of Securities Act Rule 430A.
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Current Direct Listing With a Capital Raise Requirements
    Currently, a Direct Listing with a Capital Raise must begin trading
on Nasdaq following the initial pricing through the Cross, which is
described in Rules 4120(c)(9) and 4753.\17\
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    \17\ See Listing Rule IM-5315-2.
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    Currently, in addition to pricing within the Pricing Range
Limitation,\18\ Rule 4120(c)(9) requires that in the case

of a Direct Listing with a Capital Raise, for purposes of releasing
securities for trading on the first day of listing, Nasdaq, in
consultation with the financial advisor to the issuer, will make the
determination of whether the security is ready to trade. In addition,
under Rule 4120(c)(9)(B) Nasdaq will release the security for trading
only if all market orders will be executed in the Cross. If there is
insufficient buy interest to satisfy the CDL Order and all other market
orders, or if the Pricing Range Limitation is not satisfied, the Cross
would not proceed and such security would not begin trading. In such
event, because the Cross cannot be conducted, the Exchange would
postpone and reschedule the offering and notify market participants via
a Trader Update that the Direct Listing with a Capital Raise scheduled
for that date has been cancelled and any orders for that security that
have been entered on the Exchange would be cancelled back to the
entering firms.\19\
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    \18\ See Rule 4120(c)(9)(B).
    \19\ Nasdaq will postpone and reschedule the offering only if
either or both such conditions are not met.
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Proposed Change to Rule 4120(c)(9)
    While many companies are interested in alternatives to traditional
IPOs, based on conversations with companies and their advisors Nasdaq
believes that there may be a reluctance to use the existing Direct
Listing with a Capital Raise rules because of concerns about the
Pricing Range Limitation.
    One potential benefit of a Direct Listing with a Capital Raise as
an alternative to a traditional IPO is that it could maximize the
chances of more efficient price discovery of the initial public sale of
securities for issuers and investors. Unlike an IPO where the offering
price is informed by underwriter engagement with potential investors to
gauge interest in the offering, but ultimately decided through
negotiations between the issuer and the underwriters for the offering,
in a Direct Listing with a Capital Raise the initial sale price is
determined based on market interest and the matching of buy and sell
orders in an auction open to all market participants. In that regard,
in the Approval Order the Commission stated that:

    The opening auction in a Direct Listing with a Capital Raise
provides for a different price discovery method for IPOs which may
reduce the spread between the IPO price and subsequent market
trades, a potential benefit to existing and potential investors. In
this way, the proposed rule change may result in additional
investment opportunities while providing companies more options for
becoming publicly traded.\20\
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    \20\ See Approval Order, 86 FR 28177.

    A successful initial public offering of shares requires sufficient
investor interest. If an offering cannot be completed due to lack of
investor interest, there is likely to be a substantial amount of
negative publicity for the company and the offering may be delayed or
cancelled. The Pricing Range Limitation imposed on a Direct Listing
with a Capital Raise (but not on a traditional IPO) increases the
probability of such a failed offering because the offering cannot
proceed without some delay not only for the lack of investor interest,
but also if investor interest is greater than the company, its
underwriter, and other advisors anticipated. In the Approval Order, the
Commission noted a frequent academic observation of traditional firm
commitment underwritten offerings that the IPO price, established
through negotiation between the underwriters and the issuer, is often
lower than the price that the issuer could have obtained for the
securities, based on a comparison of the IPO price to the closing price
on the first day of trading.\21\ Nasdaq believes that the price range
in a company's effective registration statement for a Direct Listing
with a Capital Raise would similarly be determined by the company, its
underwriter, and other advisors and, therefore, there may be instances
of offerings where the price determined by the Nasdaq opening auction
will exceed the highest price of the price range in the company's
effective registration statement.
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    \21\ See Approval Order, footnote 91.
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    As explained above, under the existing rule a security subject to a
Direct Listing with a Capital Raise cannot be released for trading by
Nasdaq if the actual price calculated by the Cross is above the highest
price of the price range established by the issuer in its effective
registration statement. In this case, Nasdaq would have to cancel or
postpone the offering until the company amends its effective
registration statement. At a minimum, such a delay exposes the company
to market risk of changing investor sentiment in the event of an
adverse market event. In addition, as explained above, the
determination of the public offering price of a traditional IPO is not
subject to limitations similar to the Pricing Range Limitation for a
Direct Listing with a Capital Raise, which, in Nasdaq's view, could
make companies reluctant to use this alternative method of going public
despite its expected potential benefits. This reluctance could result
in denying investors and companies the benefits of this different price
discovery method.
    Accordingly, Nasdaq proposes to modify the Pricing Range Limitation
such that in the case of the Direct Listing with a Capital Raise, a
security could be released for trading by Nasdaq if the actual price at
which the Cross would occur is as much as 20% below the lowest price of
the price range established by the issuer in its effective registration
statement. In addition, a security could be released for trading by
Nasdaq if the actual price at which the Cross would occur was above the
highest price in the price range established by the issuer in its
effective registration statement but only if the execution price is at
or below the price that is 80% above the highest price of the price
range.\22\ In such cases (whether lower or higher than the price range)
the company will be required to specify the quantity of shares
registered in its registration statement, as permitted by Securities
Act Rule 457,\23\ and that registration statement will be required to
contain a sensitivity analysis (the company must also certify to Nasdaq
in that regard) explaining how the company's plans would change if the
actual proceeds from the offering are less than or exceed the amount
assumed in the price range established by the issuer in its effective
registration statement.\24\ In addition, the company will be required
to publicly disclose and certify to Nasdaq prior to beginning of the
Display Only Period that the company does not expect that such offering
price would materially change the company's previous disclosure in its
effective registration statement. If the company's certification
submitted to Nasdaq in that regard includes a price limit that is below
the price that is 80% above the highest price of the price

range (the ``Upside Limit''), Nasdaq will not execute the Cross if it
results in the offering price above such limit. The goal of these
requirements is to have disclosure that allows investors to see how
changes in share price ripple through critical elements of the
disclosure.\25\
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    \22\ In the prior proposal, Nasdaq proposed different
requirements based on whether the Cross would occur at a price that
was within 20% of the price range. See Disapproval Order. Nasdaq is
eliminating this proposed distinction and is proposing herein to
treat all prices outside of the price range the same.
    \23\ Securities Act Rule 457 permits issuers to register
securities either by specifying the quantity of shares registered,
pursuant to Rule 457(a), or the proposed maximum aggregate offering
amount. Nasdaq proposes to require that companies selling shares
through a Direct Listing with a Capital Raise will register
securities by specifying the quantity of shares registered and not a
maximum offering amount. See also Compliance & Disclosure
Interpretation of Securities Act Rules #227.03 at https://www.sec.gov/divisions/corpfin/guidance/securitiesactrules-interps.htm.
    \24\ The price range in the preliminary prospectus included in
the effective registration statement must be a bona fide price range
in accordance with Item 501(b)(3) of Regulation S-K.
    \25\ Sensitivity analysis disclosure may include but is not
limited to: use of proceeds; balance sheet and capitalization; and
the company's liquidity position after the offering. An example of
this disclosure could be: We will apply the net proceeds from this
offering first to repay all borrowings under our credit facility and
then, to the extent of any proceeds remaining, to general corporate
purposes.
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    Nasdaq believes that this approach is consistent with SEC Rule 430A
and question 227.03 of the SEC Staff's Compliance and Disclosure
Interpretations, which generally allow a company to price a public
offering 20% outside of the disclosed price range without regard to the
materiality of the changes to the disclosure contained in the company's
registration statement. Nasdaq believes such guidance also allows
deviation above the price range beyond the 20% threshold if such change
or deviation does not materially change the previous disclosure.
Accordingly, Nasdaq believes that a company listing in connection with
a Direct Listing with a Capital Raise can specify the quantity of
shares registered, as permitted by Securities Act Rule 457, and, when
an auction prices outside of the disclosed price range, use a Rule
424(b) prospectus, rather than a post-effective amendment, when either
(i) the 20% threshold noted in the instructions to Rule 430A is not
exceeded, regardless of the materiality or non-materiality of resulting
changes to the registration statement disclosure that would be
contained in the Rule 424(b) prospectus, or (ii) when there is a
deviation above the price range beyond the 20% threshold noted in the
instructions to Rule 430A if such deviation would not materially change
the previous disclosure, in each case assuming the number of shares
issued is not increased from the number of shares disclosed in the
prospectus. For purposes of this rule, the 20% threshold will be
calculated based on the maximum offering price set forth in the
registration fee table, consistent with the Instruction to paragraph
(a) of Securities Act Rule 430A.\26\
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    \26\ Nasdaq believes that applying additional protections
related to the disclosure requirements in the registration statement
and the certifications to Nasdaq, as described above, to all
instances where the Cross is executed outside the disclosed price
range addresses an issue the Commission raised in the Disapproval
Order. See footnote 15 above. For brevity, proposed rules define the
``Price Range'' as the price range established by the issuer in its
preliminary prospectus included in the effective registration
statement, including the maximum and the minimum prices of such
range; and ``DLCR Price Range'' as the price range that includes any
price that is below the Price Range and at or above the price that
is 20% below the lowest price of the Price Range, or is above the
highest price of the Price Range. If the company's certification
includes an upside limit, the DLCR Price Range is as defined in the
preceding sentence, but subject to the upper limit provided by the
company in its certification.
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    Nasdaq notes that the Commission previously stated that while
Securities Act Rule 430A permits companies to omit specified price-
related information from the prospectus included in the registration
statement at the time of effectiveness, and later file the omitted
information with the Commission as specified in the rule, it neither
prohibits a company from conducting a registered offering at prices
beyond those that would permit a company to provide pricing information
through a Securities Act Rule 424(b) prospectus supplement nor absolves
any company relying on the rule from any liability for potentially
misleading disclosure under the federal securities laws.\27\
Accordingly, the burden of complying with the disclosures required
under federal securities laws, including providing any disclosure
necessary to avoid any material misstatements or omissions, remains
with the issuer. In that regard, Nasdaq believes that the Post-Pricing
Period, applicable in circumstances where the actual price calculated
by the Cross is outside of the price range established by the issuer in
its effective registration statement, as described below, provides the
company an opportunity, prior to the completion of the offering, to
provide any necessary additional disclosures that are dependent on the
price of the offering, if any; and/or determine and confirm to Nasdaq
that no additional disclosures are required under federal securities
laws based on the actual price calculated by the Cross.
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    \27\ Securities Exchange Act Release No. 93119 (September 24,
2021), 86 FR 54262 (September 30, 2021).
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    Nasdaq believes that an underwriter plays an important role in a
traditional IPO and, therefore, proposes to require that a company
listing securities on Nasdaq in connection with a Direct Listing with a
Capital Raise must retain an underwriter with respect to the primary
sales of shares by the company and identify the underwriter in its
effective registration statement. Describing the role and
responsibilities of an underwriter, the Commission recently explained
that:

[a]s intermediaries between an issuer and the investing public,
underwriters play a critical role as ``gatekeepers'' to the public
markets. Historically, in initial public offerings, where the
investing public might be unfamiliar with a particular issuer,
financial firms that act as underwriters would lend their well-known
name to support that issuer's offering. Where public investors may
not have been inclined to invest with the company seeking to conduct
a public offering, they could take comfort in the fact that a large,
well-known financial institution, acting as underwriter, was
including its name on the first page of the issuer's prospectus . .
.
    An underwriter's participation in an issuer's offering also
exposes the underwriter to potential liability under the Securities
Act. The civil liability provisions of the Securities Act reflect
the unique position underwriters occupy in the chain of distribution
of securities and provide strong incentives for underwriters to take
steps to help ensure the accuracy of disclosure in a registration
statement. Section 11 of the Securities Act imposes on underwriters,
among other parties identified in Section 11(a), civil liability for
any part of the registration statement, at effectiveness, which
contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make
the statements therein not misleading, to any person acquiring such
security. Similarly, Section 12(a)(2) imposes liability upon anyone,
including underwriters, who offers or sells a security, by means of
a prospectus or oral communication, which includes an untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading, to any
person purchasing such security from them. These provisions provide
significant investor protections to those who acquire securities
sold pursuant to a registration statement by providing tools to hold
companies, underwriters, and other parties accountable for
misstatements and omissions in connection with public offerings of
securities. As a result, anyone who might be named as a potential
defendant in these suits has strong incentives to take the necessary
steps to avoid such liability.
    One defense available to an underwriter in a distribution is the
``due diligence'' defense, which shields an underwriter from
liability if it can establish that, after reasonable investigation,
the underwriter had reasonable ground to believe and did believe, at
the time the registration statement became effective, that the
statements therein were true and that there was no omission to state
a material fact required to be stated therein or necessary to make
the statements therein not misleading.\28\
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    \28\ Special Purpose Acquisition Companies, Shell Companies, and
Projections, 87 FR 29,458 (May 13, 2022).

    Nasdaq believes that these significant investor protections
provisions are necessary in a Direct Listing with a Capital Raise if an
offering can price outside the price range established in the issuer's
effective registration statement, subject to proposed limitations,
because such provisions

allow investors to make reasonable pricing decisions with clarity that
the company's underwriter would face statutory liability, as described
above. Accordingly, Nasdaq proposes to require that a company listing
securities on Nasdaq in connection with a Direct Listing with a Capital
Raise must retain an underwriter with respect to the primary sales of
shares by the company and identify the underwriter in its effective
registration statement.
    Nasdaq also believes that the requirement to retain a named
underwriter, as described above, may mitigate concerns, raised by the
Commission in the OIP, regarding challenges to bringing claims under
Section 11 of the Securities Act due to the potential assertion of
tracing defenses because an underwriter may choose to impose lock-up
arrangements, as described below.
    As a preliminary matter, Nasdaq notes that in the Approval Order
the Commission explained that the issue of traceability:

is potentially implicated anytime securities that are not the
subject of a recently effective registration statement trade in the
same market as those that are so subject. Where a registration
statement, at the time of effectiveness, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, Section 11(a) of the Securities Act provides
a cause of action to ``any person acquiring such security,'' unless
it is proved that at the time of the acquisition the person ``knew
of such untruth or omission.'' In the context of conventional public
offerings, courts have interpreted this statutory provision to
permit aftermarket purchasers (i.e., those who acquire their
securities in secondary market transactions rather than in the
initial distribution from the issuer or underwriter) to recover
damages under Section 11, but only if they can trace the acquired
shares back to the offering covered by the false or misleading
registration statement. Tracing is not set forth in Section 11 and
is a judicially-developed doctrine. The application of this doctrine
and, in particular, the pleading standards and factual proof that
potential claimants must satisfy vary depending on the particular
facts of the distribution and judicial district, and may be affected
by pending litigation.\29\
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    \29\ The Approval order, 86 FR 28176

    The Commission then reaffirmed its position that ``concerns
regarding shareholders' ability to pursue claims pursuant to Section 11
of the Securities Act due to traceability issues are not exclusive to
nor necessarily inherent in a [ ] Direct Listing with a Capital
Raise.'' The Commission further stated that it ``is not aware of any
precedent to date in the direct listing context which prohibits
plaintiffs from pursuing Section 11 claims. The Commission is actively
monitoring this issue and will be able to respond to such concerns when
and if they arise.'' \30\ Nasdaq believes that no such precedent exists
as of the date of this Amendment and that the modifications to the
Pricing Range Limitation in this proposal do not, in any way,
exacerbate the tracing issues.
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    \30\ The Approval order, 86 FR 28177
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    However, as stated above, Nasdaq believes that the requirement to
retain a named underwriter may mitigate traceability concerns that may
arise in a Direct Listing with a Capital Raise. As in a traditional
firm commitment underwritten IPO, in which lock-up arrangements are
often imposed, an underwriter retained in connection with a Direct
Listing with a Capital Raise, as required by the Amendment, will be
able to impose lock-up arrangements for the same reasons that make lock
up agreements common in an IPO.
    Nasdaq also believes that the requirement to retain a named
underwriter, as described above, mitigates concerns, raised by the
Commission in the OIP, regarding the usefulness of price range
disclosure provided to investors in a Securities Act registration
statement filed in connection with a Direct Listing with a Capital
Raise. Nasdaq believes that an underwriter retained in connection with
a Direct Listing with a Capital Raise will perform substantially
similar functions, including those related to establishing and
adjusting the price range, to those performed by an underwriter in a
typical IPO because the underwriter will be subject to similar
liability and reputational risk.
    To further mitigate concerns regarding the usefulness of price
range disclosure provided to investors, Nasdaq proposes to require that
the securities of a company listing in connection with a Direct Listing
with a Capital Raise cannot price above the Upside Limit. The Upside
Limit will incentivize the company and its underwriter to set the
disclosed price range to avoid a failed offering consequences described
above. The Upside Limit would also help assure that an issuer would
adjust the price range disclosed in their registration statements prior
to effectiveness in light of pricing feedback received from market
analysts and potential investors.
    To determine an appropriate Upside Limit, Nasdaq analyzed operating
companies IPOs on the Nasdaq Global Select Market and the NYSE for the
past five years where an IPO opened on an exchange at a price that is
above the highest price of the price range in the issuer's effective
registration statement.\31\ This analysis indicated that some IPOs
opened on an exchange at a price that was more than 100% above the
highest price of the price range. Based on the same data, more than
half of these IPOs opened at a price that was 30% or more above the
highest price of the price range. However, about 90% of these IPOs
opened at a price that was no more than the Upside Limit. Based on this
data Nasdaq believes that, on balance, capital formation and investor
protection goals would be best served by a pricing limitation equal to
the Upside Limit.
---------------------------------------------------------------------------

    \31\ This data set included over 400 records and covers a period
from January 2017 to July 2022.
---------------------------------------------------------------------------

    Nasdaq also proposes to adopt a new Price Volatility Constraint and
disseminate information about whether the Price Volatility Constraint
has been satisfied, which will indicate whether the security may be
ready to trade. Prior to releasing a security for trading, Nasdaq
allows a ``Pre-Launch Period'' of indeterminate length, during which
price discovery takes place. The Price Volatility Constraint requires
that the Current Reference Price has not deviated by 10% or more from
any Current Reference Price during the Pre-Launch Period within the
previous 10 minutes. The Pre-Launch Period will continue until at least
five minutes after the Price Volatility Constraint has been satisfied.
Nasdaq will also introduce the Near Execution Price which is the
Current Reference Price at the time the Price Volatility Constraint has
been satisfied; and set the Near Execution Time as such time. This
change will provide investors with notice that the Cross nears
execution and allows a period of at least five minutes for investors to
modify their orders, if needed, based on the Near Execution Price,
prior to the execution of the Cross and the pricing of the offering.
Further, to assure that the Near Execution Price is a meaningful
benchmark for investors, and that the offering price does not deviate
substantially from the Near Execution Price, Nasdaq proposes to
require, in addition to other the existing conditions stated in
proposed Rule 4120(c)(9)(B)(vii), that the Cross may execute only if
the actual price calculated by the Cross is no more than 10% below or
above the Near Execution Price (the ``10% Price Collar'').
    Nasdaq notes that imbalance between the buy and sell orders could
sometimes cause the Current Reference Price to fall outside the 10%
Price Collar after the Price Volatility Constraint has been satisfied.
Such price fluctuations could

be temporary, and the Current Reference Price may return to and remain
within the 10% Price Collar. The price fluctuation could also be
lasting such that the Current Reference Price remains outside the 10%
Price Collar. Given this, Nasdaq proposes to assess the Current
Reference Price vis-[agrave]-vis the 10% Price Collar 30 minutes after
the Near Execution Time. If at that time the Current Reference Price is
outside the 10% Price Collar, all requirements of the Pre-Launch Period
shall reset and must be satisfied again.\32\ Once the Price Volatility
Constraint has been satisfied anew, the Current Reference Price at such
time will become the updated Near Execution Price and such time will
become the updated Near Execution Time. This process will continue
iteratively, if new resets are triggered, until the Cross is executed,
or the offering is postponed.
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    \32\ For the avoidance of doubt, while the Price Volatility
Constraint cannot initially be satisfied sooner than ten minutes
after the beginning of the Pre-Launch Period, if it is subsequently
reset, the Price Volatility Constraint can be satisfied again in
less than ten minutes because it would look back at prior pricing
during the Pre-Launch Period (including pricing prior to the reset)
to determine if the Current Reference Price has deviated by 10% or
more from any Current Reference Price within the previous 10
minutes.
---------------------------------------------------------------------------

    If the Current Reference Price 30 minutes after the Near Execution
Time is within the 10% Price Collar, price formation may continue
without limitations until Nasdaq, in consultation with the financial
advisor to the issuer, makes the determination that the security is
ready to trade (and certain existing conditions restated in proposed
Rule 4120(c)(9)(B)(vii) are met). However, if at any time 30 minutes
after the Near Execution Time the Current Reference Price is outside
the 10% Price Collar, all requirements of the Pre-Launch Period shall
reset and must be satisfied again, in the same manner as described in
the immediately preceding paragraph.
    Given that, as proposed, there may be a Direct Listing with a
Capital Raise that could price outside the price range of the company's
effective registration statement, subject to the Upside Limit above
which the Cross could not proceed,\33\ Nasdaq proposes to enhance price
discovery transparency by providing readily available, real time
pricing information to investors. To that end Nasdaq will disseminate,
free of charge, the Current Reference Price on a public website, such
as Nasdaq.com, during the Pre-Launch Period and indicate whether the
Current Reference Price is within the price range established by the
issuer in its effective registration statement. Once the Price
Volatility Constraint has been satisfied, Nasdaq will also disseminate
the Near Execution Price, the Near Execution Time and the 30-minute
countdown from such time. The disclosure will indicate that the Near
Execution Price and the Near Execution Time may be reset, as described
above, if the security is not released for trading within 30 minutes of
the Near Execution Time and the Current Reference Price at such time
(or at any time thereafter) is more than 10% below or more than 10%
above the Near Execution Price.
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    \33\ In addition to the Upside Limit, if the company's
certification submitted to Nasdaq pursuant to proposed Listing Rule
4120(c)(9)(B)(vii)d.2. includes a price limit that is lower than the
Upside Limit and the actual price calculated by the Cross exceeds
such lower limit, Nasdaq will postpone and reschedule the offering.
---------------------------------------------------------------------------

    In this way, investors interested in participating in the opening
auction will be informed when volatility has settled to a range that
will allow the open to take place and they will be informed of the
price range at which the auction would take place. If the price moves
outside, and remains outside this range, 30 minutes after the original
range was set they will be informed of the new range and will have at
least five minutes to reevaluate their investment decision.\34\
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    \34\ Nasdaq believes that the introduction, as described above,
of the 10% Price Collar, the Near Execution Price, the Near
Execution Time, the 30-minute reset and the five minute prohibition
on executing the Cross after the Price Volatility Constraint has
been satisfied addresses concerns the Commission raised in the
Disapproval Order. See footnote 15 above. Specifically, in the
Disapproval Order, the Commission stated that, as previously
proposed, ``investors could be misled that the opening cross `nears
execution' and that the disseminated Current Reference Price will
likely be close to the opening auction price when, in fact, the
auction may not occur for a considerable time and the opening
auction price may differ substantially.'' As revised, the opening
auction price must remain within 10% of the price publicly announced
as the Near Execution Price for the auction to occur and investors
will have enhanced disclosure about the possibility that the Price
Volatility Constraint could be reset.
---------------------------------------------------------------------------

    Nasdaq also proposes to prohibit market orders (other than by the
Company through its CDL Order) from the opening of a Direct Listing
with a Capital Raise. This will protect investors by assuring that
investors only purchase shares at a price at or better than the price
they affirmatively set, after having the opportunity to review the
company's effective registration statement including the sensitivity
analysis describing how the company will use any additional proceeds
raised. Accordingly, an investor participating in a Direct Listing with
a Capital Raise will make their initial investment decision prior to
the launch of the offering by setting the price in their limit order
above which they will not buy shares in the offering, but will also
have an opportunity to reevaluate their initial investment decision
during the price formation process of the Pre-Launch Period based on
the Near Execution Price. Under the proposed rule, such investor will
have at least five minutes once the Near Execution Price has been set
and before the offering may be priced by Nasdaq to modify their order,
if needed. As described above, all relevant price formation information
will be disseminated by Nasdaq on a public website in real time.
    In addition, to protect investors and assure that they are informed
about the attributes of a Direct Listing with a Capital Raise, Nasdaq
proposes to impose specific requirements on Nasdaq members with respect
to a Direct Listing with a Capital Raise. These rules will require
members to provide to a customer, before that customer places an order
to be executed in the Cross, a notice describing the mechanics of
pricing a security subject to a Direct Listing with a Capital Raise in
the Cross, including information regarding the location of the public
website where Nasdaq will disseminate the Current Reference Price.
    To assure that members have the necessary information to be
provided to their customers, Nasdaq proposes to distribute, at least
one business day prior to the commencement of trading of a security
listing in connection with a Direct Listing with a Capital Raise, an
information circular to its members that describes any special
characteristics of the offering, and Nasdaq's rules that apply to the
initial pricing through the mechanism outlined in Nasdaq Rule
4120(c)(9)(B) and Nasdaq Rule 4753 for the opening auction, including
information about the notice they must provide customers and other
Nasdaq requirements that:
     members use reasonable diligence in regard to the opening
and maintenance of every account, to know (and retain) the essential
facts concerning every customer and concerning the authority of each
person acting on behalf of such customer; and
     members in recommending transactions for a security
subject to a Direct Listing with a Capital Raise have a reasonable
basis to believe that: (i) the recommendation is suitable for a
customer given reasonable inquiry concerning the customer's investment
objectives, financial situation, needs, and any other information known
by such members, and (ii) the customer can evaluate the special
characteristics, and is able to bear the financial risks, of an
investment in such security.

    These member requirements are intended to remind members of their
obligations to ``know their customers,'' increase transparency of the
pricing mechanisms of a Direct Listing with a Capital Raise, and help
assure that investors have sufficient price discovery information.
    In each instance of a Direct Listing with a Capital Raise, Nasdaq's
information circular \35\ will inform the market participants that the
auction could price up to 20% below the lowest price of the price range
in the company's effective registration statement and specify what that
price is. Nasdaq will also indicate in such circular a statement that
the Cross cannot proceed at a price in excess of the Upside Limit and
whether or not there is a lower price limit above which the Cross could
not proceed, based on the company's certification, as described above.
Nasdaq will also remind the market participants that Nasdaq prohibits
market orders (other than by the company) from the opening of a Direct
Listing with a Capital Raise.
---------------------------------------------------------------------------

    \35\ The information circular is an industry wide free service
provided by Nasdaq.
---------------------------------------------------------------------------

    To assure that the issuer has the ability, prior to the completion
of the offering, to provide any necessary additional disclosures that
are dependent on the price of the offering, Nasdaq proposes to
introduce to the operation of the Cross a brief Post-Pricing Period, in
circumstances where the actual price calculated by the Cross is outside
of the price range established by the issuer in its effective
registration statement. Specifically, in such circumstances, Nasdaq
will initiate a Post-Pricing Period following the calculation of the
actual price. During the Post-Pricing Period the issuer must confirm to
Nasdaq that no additional disclosures are required under federal
securities laws based on the actual price calculated by the Cross.
During the Post-Pricing Period no additional orders for the security
may be entered in the Cross and no existing orders in the Cross may be
modified. The security shall be released for trading immediately
following the Post-Pricing Period. If the company cannot provide the
required confirmation, then Nasdaq will postpone and reschedule the
offering.
Proposed Conforming Changes to Listing Rule IM-5315-2
    Listing Rule IM-5315-2 allows a company that has not previously had
its common equity securities registered under the Act to list its
common equity securities on the Nasdaq Global Select Market at the time
of effectiveness of a registration statement pursuant to which the
company itself will sell shares in the opening auction on the first day
of trading on the Exchange.
    Listing Rule IM-5315-2 provides that in determining whether a
company listing in connection with a Direct Listing with a Capital
Raise satisfies the Market Value of Unrestricted Publicly Held Shares
\36\ for initial listing on the Nasdaq Global Select Market, the
Exchange will deem such company to have met the applicable requirement
if the amount of the company's Unrestricted Publicly Held Shares before
the offering along with the market value of the shares to be sold by
the company in the Exchange's opening auction in the Direct Listing
with a Capital Raise is at least $110 million (or $100 million, if the
company has stockholders' equity of at least $110 million).
---------------------------------------------------------------------------

    \36\ See Listing Rules 5005(a)(23) and 5005(a)(45).
---------------------------------------------------------------------------

    Listing Rule IM-5315-2 further provides that, for this purpose, the
Market Value of Unrestricted Publicly Held Shares will be calculated
using a price per share equal to the lowest price of the price range
disclosed by the issuer in its effective registration statement.
    Because Nasdaq proposes to allow the opening auction to price up to
20% below the lowest price of the price range established by the issuer
in its effective registration statement, Nasdaq proposes to make a
conforming change to Listing Rule IM-5315-2 to provide that the price
used to determine such company's compliance with the Market Value of
Unrestricted Publicly Held Shares is the price per share equal to the
price that is 20% below the lowest price of the price range disclosed
by the issuer in its effective registration statement. Nasdaq proposes
to clarify in Listing Rule IM-5315-2 that the 20% threshold below the
price range will be calculated based on the maximum offering price set
forth in the registration fee table. Nasdaq will determine that the
company has met the applicable bid price and market capitalization
requirements based on the same per share price. This price is the
minimum price at which the company could sell its shares in the Direct
Listing with a Capital Raise transaction and so assures that the
company will satisfy these requirements at any price at which the
auction successfully executes.
    Any company listing in connection with a Direct Listing with a
Capital Raise would continue to be subject to, and required to meet,
all other applicable initial listing requirements, including the
requirements to have the applicable number of shareholders and at least
1,250,000 Unrestricted Publicly Held Shares outstanding at the time of
initial listing, and the requirement to have a price per share of at
least $4.00 at the time of initial listing.\37\
---------------------------------------------------------------------------

    \37\ See Listing Rules 5315(f)(1), (e)(1) and (2), respectively.
Rule 5315(f)(1) requires a security to have: (A) at least 550 total
holders and an average monthly trading volume over the prior 12
months of at least 1,100,000 shares per month; or (B) at least 2,200
total holders; or (C) a minimum of 450 round lot holders and at
least 50% of such round lot holders must each hold unrestricted
securities with a market value of at least $2,500.
---------------------------------------------------------------------------

Proposed Conforming Changes to Rules 4753(a)(3)(A) and 4753(b)(2)
    Nasdaq proposes to amend Rules 4753(a)(3)(A) and 4753(b)(2) to
conform the requirements for disseminating information and establishing
the opening price through the Cross in a Direct Listing with a Capital
Raise to the proposed amendment to allow the opening auction to price
as much as 20% below the lowest price of the price range established by
the issuer in its effective registration statement.
    Specifically, Nasdaq proposes changes to Rules 4753(a)(3)(A) and
4753(b)(2) to make adjustments to the calculation of the Current
Reference Price, which is disseminated in the Nasdaq Order Imbalance
Indicator, in the case of a Direct Listing with a Capital Raise and for
how the price at which the Cross will execute. These rules currently
provide that where there are multiple prices that would satisfy the
conditions for determining a price, the fourth tie-breaker for a Direct
Listing with a Capital Raise is the price that is closest to the lowest
price of the price range disclosed by the issuer in its effective
registration statement.\38\
---------------------------------------------------------------------------

    \38\ To illustrate: The bottom of the range is $10. More than
one price exists within the range under the previous set of tie-
breakers such that both $10.15 and $10.25, satisfy all other
requirements. The operation of the fourth tie-breaker will result in
the auction price of $10.15 because it is the price that is closest
to $10.
---------------------------------------------------------------------------

    To conform these rules to the modification of the Pricing Range
Limitation change, as described above, Nasdaq proposes to modify the
fourth tie-breaker for a Direct Listing with a Capital Raise, to use
the price closest to the price that is 20% below (calculated as
provided for in Listing Rule IM-5315-2) the lowest price of the price
range disclosed by the issuer in its effective registration
statement.\39\
---------------------------------------------------------------------------

    \39\ Note that using the price that is 20% below the lowest
price of the price range disclosed by the issuer in its effective
registration statement as a tie-breaker (rather than the price
representing the bottom of the range) does not change the outcome in
the example in footnote 38 above because $10.15 is the price that is
closest to either.
---------------------------------------------------------------------------

    Lastly, Nasdaq proposes to clarify several provisions of the
existing rules

by restating the provisions of Rules 4120(c)(8)(A) and (c)(9)(A) in a
clear and direct manner without substantively changing them.
Specifically, Nasdaq proposes to clarify the mechanics of the Cross by
specifying that Nasdaq will initiate a 10-minute Display Only Period
only after the CDL Order had been entered. This clarification simply
states what is already implied by the rule because the Cross and the
offering may not proceed without the company's order to sell the
securities in a Direct Listing with a Capital Raise. Similarly, Nasdaq
proposes to clarify without changing the existing rule that Nasdaq
shall select price bands for purposes of applying the price validation
test in the Cross in connection with a Direct Listing with a Capital
Raise. Under the price validation test, the System compares the
Expected Price with the actual price calculated by the Cross to
ascertain that the difference, if any, is within the price bands.
Nasdaq shall select an upper price band and a lower price band. The
default for an upper and a lower price band is set at zero. If a
security does not pass the price validation test, Nasdaq may, but is
not required to, select different price bands before recommencing the
process to release the security for trading.\40\ Nasdaq also proposes
to clarify that the ``actual price,'' as the term is used in the rule,
is the Current Reference Price at the time the system applies the price
bands test.
---------------------------------------------------------------------------

    \40\ This function is provided by the underwriter in an IPO and
by a Financial Advisor in a Direct Listing when the company is not
selling shares in a primary offering. The Commission previously
approved Nasdaq performing this function. See Approval Order.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\41\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\42\ 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.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78f(b).
    \42\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Nasdaq believes that the proposed amendment to modify the Pricing
Range Limitation is consistent with the protection of investors because
this approach is similar to the pricing of an IPO where an issuer is
permitted to price outside of the price range disclosed by the issuer
in its effective registration statement in accordance with the SEC's
Staff guidance, as described above.\43\ Specifically, Nasdaq believes
that a company listing in connection with a Direct Listing with a
Capital Raise can specify the quantity of shares registered, as
permitted by Securities Act Rule 457, and, when an auction prices
outside of the disclosed price range, use a Rule 424(b) prospectus,
rather than a post-effective amendment, when either (i) the 20%
threshold noted in the instructions to Rule 430A is not exceeded,
regardless of the materiality or non-materiality of resulting changes
to the registration statement disclosure that would be contained in the
Rule 424(b) prospectus, or (ii) when there is a deviation above the
price range beyond the 20% threshold noted in the instructions to Rule
430A if such deviation would not materially change the previous
disclosure, in each case assuming the number of shares issued is not
increased from the number of shares disclosed in the prospectus. As a
result, Nasdaq will allow the Cross to take place as low as 20% below
the lowest price of the price range disclosed by the issuer in its
effective registration statement, but no lower, and so this is the
minimum price at which the company could be listed. In addition, to
better inform investors and market participants, Nasdaq will issue an
industry wide circular to inform the participants that the auction
could price up to 20% below the lowest price of the price range in the
company's effective registration statement and specify what that price
is. Nasdaq will also indicate in such circular that the Cross cannot
proceed at a price in excess of the Upside Limit and whether or not
there is a lower price limit above which the Cross could not proceed,
based on the company's certification, as described above. Nasdaq will
also remind the market participants that Nasdaq prohibits market orders
(other than by the company) from the opening of a Direct Listing with a
Capital Raise.
---------------------------------------------------------------------------

    \43\ In a recent speech, SEC Chair Gary Gensler emphasized that
an overarching principle of regulation is that like activities ought
to be treated alike. See https://www.sec.gov/news/speech/gensler-healthy-markets-association-conference-120921.
---------------------------------------------------------------------------

    To assure that the issuer has the ability, prior to the completion
of the offering, to provide any necessary additional disclosures that
are dependent on the price of the offering, Nasdaq proposes to
introduce to the operation of the Cross a brief Post-Pricing Period, in
circumstances where the actual price calculated by the Cross is at or
above the price that is 20% below the lowest price and below the lowest
price of the price range established by the issuer in its effective
registration statement; or is above the highest price of the price
range established by the issuer in its effective registration statement
but below the Upside Limit (and below the high end price limit, if any,
set in the company's certification submitted to Nasdaq pursuant to
proposed Listing Rule 4120(c)(9)(B)(vii)d.2., if any). Specifically, in
such circumstances, Nasdaq will initiate a Post-Pricing Period
following the calculation of the actual price. During the Post-Pricing
Period the issuer must confirm to Nasdaq that no additional disclosures
are required under federal securities laws based on the actual price
calculated by the Cross, with such confirmation ending the Post-Pricing
Period. During the Post-Pricing Period no additional orders for the
security may be entered in the Cross and no existing orders in the
Cross may be modified. The security shall be released for trading
immediately following the Post-Pricing Period. If the company cannot
provide the required confirmation, then Nasdaq will postpone and
reschedule the offering. Nasdaq believes that this modification is
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market
because it will help assure that a company listing in connection with a
Direct Listing with a Capital Raise complies with the disclosure
requirements under federal securities laws and that investors receive
all required information.
    Nasdaq believes that the proposal to allow a Direct Listing with a
Capital Raise to price above the price range of the company's effective
registration statement but below the Upside Limit is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market investors
because this approach is similar to, but more stringent than, that of
pricing a traditional IPO. In addition, to protect investors Nasdaq
proposes to enhance price discovery transparency by providing readily
available, real time pricing information to investors. To that end
Nasdaq will disseminate, free of charge, the Current Reference Price on
a public website (such as Nasdaq.com) during the Pre-Launch Period and
indicate whether the Current Reference Price is within the price range
established by the issuer in its effective registration statement.
    Nasdaq believes that a proposed requirement that a company offering
securities for sale in connection with a

Direct Listing with a Capital Raise must retain an underwriter with
respect to the primary sales of shares by the company and identify the
underwriter in its effective registration statement is designed to
protect investors and the public interest because these provisions
provide significant investor protections to those who acquire
securities sold pursuant to a registration statement by providing tools
to hold underwriters accountable for misstatements and omissions in
connection with a Direct Listing with a Capital Raise.
    Nasdaq believes that the requirement that the securities of a
company listing in connection with a Direct Listing with a Capital
Raise cannot price above the Upside Limit is designed to protect
investors and the public interest because it would incentivize the
company and its underwriter to avoid a failed offering by taking steps
to help ensure the accuracy of price range disclosure in a registration
statement. In addition, as described above, an underwriter has strong
incentives to take the necessary steps to avoid statutory liability.
    Nasdaq believes that the provision prohibiting market orders (other
than by the company) from the opening of a Direct Listing with a
Capital Raise is designed to protect investors because this provision
will assure that investors only purchase shares at a price that is at,
or better than, the price they affirmatively set, after having the
opportunity to review the company's effective registration statement
including the sensitivity analysis describing how the company will use
any additional proceeds raised.
    Nasdaq also proposes to adopt a new Price Volatility Constraint and
disseminate information about whether the Price Volatility Constraint
has been satisfied, which will indicate whether the security may be
ready to trade. The Price Volatility Constraint requires that the
Current Reference Price has not deviated by 10% or more from any
Current Reference Price within the previous 10 minutes. The Pre-Launch
Period will continue until at least five minutes after the Price
Volatility Constraint has been satisfied. Nasdaq will also introduce
the Near Execution Price which is the Current Reference Price at the
time the Price Volatility Constraint has been satisfied; and set the
Near Execution Time at such time. This change will provide investors
with notice that the Cross nears execution and a period of at least
five minutes to modify their orders, if needed, based on the Near
Execution Price, prior to the execution of the Cross and the pricing of
the offering. Further, to help assure that the offering price does not
deviate substantially from the Near Execution Price, Nasdaq proposes to
require, in addition to other conditions described above, that the
Cross may execute only if the actual price calculated by the Cross is
within the 10% Price Collar. Nasdaq believes that these changes are
designed to protect investors and the public interest because an
investor participating in a Direct Listing with a Capital Raise will
make their initial investment decision prior to the launch of the
offering by setting the price in their limit order above which they
will not buy shares in the offering, but will also have an opportunity
to reevaluate their initial investment decision during the price
formation process of the Pre-Launch Period based on the Near Execution
Price. Under the proposed rule, such investor will have at least five
minutes once the Near Execution Price has been set and before the
offering may be priced by Nasdaq to modify their order, if needed.
While the auction may take longer than this five minute period to
complete, investors are protected during this time because the Price
Volatility Constraint will reset if the actual price calculated by the
Cross is more than 10% below or above the Near Execution Price. Once
the Price Volatility Constraint has been satisfied, Nasdaq proposes to
disseminate the Near Execution Price and the Near Execution Time on a
public website, such as Nasdaq.com.
    Nasdaq believes that the proposal to reset the Price Volatility
Constraint, the Near Execution Price and the Near Execution Time in the
circumstances described above is designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market investors because in certain circumstances an
imbalance between the buy and sell orders could sometimes cause the
Current Reference Price to fall outside the 10% Price Collar after the
Price Volatility Constraint has been satisfied. These provisions will
protect investors by increasing the information available to them in
connection with the price formation process during the opening auction.
    To protect investors and increase transparency, Nasdaq also
proposes to disseminate on a public website, such as Nasdaq.com, the
30-minute countdown from the Near Execution Time and indicate that the
Near Execution Price and the Near Execution Time may be reset, as
described above, if the security is not released for trading within 30
minutes of the Near Execution Time and the Current Reference Price at
such time (or at any time thereafter) is outside the 10% Price Collar.
    In addition, to protect investors and assure that they are informed
about the attributes of a Direct Listing with a Capital Raise, Nasdaq
proposes to impose specific requirements on Nasdaq members with respect
to a Direct Listing with a Capital Raise. These rules will require
members to provide to a customer, before that customer places an order
to be executed in the Cross, a notice describing the mechanics of
pricing a security subject to a Direct Listing with a Capital Raise in
the Cross, including information regarding the dissemination of the
Current Reference Price on a public website such as Nasdaq.com.
    To assure that members have the necessary information to be
provided to their customers, Nasdaq proposes to distribute, at least
one business day prior to the commencement of trading of a security
listing in connection with a Direct Listing with a Capital Raise, an
information circular to its members that describes any special
characteristics of the offering, and Nasdaq's rules that apply to the
initial pricing through the mechanism outlined in Nasdaq Rule
4120(c)(9)(B) and Nasdaq Rule 4753 for the opening auction, including
information about the notice they must provide customers and other
Nasdaq requirements that:
     members use reasonable diligence in regard to the opening
and maintenance of every account, to know (and retain) the essential
facts concerning every customer and concerning the authority of each
person acting on behalf of such customer; and
     members in recommending transactions for a security
subject to a Direct Listing with a Capital Raise have a reasonable
basis to believe that: (i) the recommendation is suitable for a
customer given reasonable inquiry concerning the customer's investment
objectives, financial situation, needs, and any other information known
by such members, and (ii) the customer can evaluate the special
characteristics, and is able to bear the financial risks, of an
investment in such security.
    These member requirements are consistent with the protection of
investors because they are designed to remind members of its
obligations to ``know their customers,'' increase transparency of the
pricing mechanisms of a Direct Listing with a Capital Raise, and help
assure that investors have sufficient price discovery information.
    Nasdaq believes that the Commission Staff has already concluded
that pricing up to 20% below the lowest price and at a price above the
highest price of the

price range in the company's effective registration statement is
appropriate for a company conducting an initial public offering
notwithstanding it being outside of the range stated in an effective
registration statement, and investors have become familiar with this
approach at least since the Commission Staff last revised Compliance
and Disclosure Interpretation 227.03 in January 2009.\44\ Allowing
Direct Listings with a Capital Raise to similarly price up to 20% below
the lowest price and at a price above the highest price of the price
range in the company's effective registration statement but below the
Upside Limit would be consistent with Chair Gensler's recent call to
treat ``like cases alike.'' \45\
---------------------------------------------------------------------------

    \44\ https://www.sec.gov/divisions/corpfin/guidance/securitiesactrules-interps.htm.
    \45\ See https://www.sec.gov/news/speech/gensler-healthy-markets-association-conference-120921.
---------------------------------------------------------------------------

    Nasdaq believes that the proposed amendments to Listing Rule IM-
5315-2 and Rules 4753(a)(3)(A) and 4753(b)(2) to conform these rules to
the modification of the Pricing Range Limitation is consistent with the
protection of investors. These amendments would simply substitute
Nasdaq's reliance on the price equal to the lowest price of the price
range disclosed by the issuer in its effective registration statement
to the price that is 20% below such lowest price, making it more
difficult to meet the requirements. In the case of Listing Rule IM-
5315-2, a company listing in connection with a Direct Listing with a
Capital Raise would still need to meet all applicable initial listing
requirements based on the price that is 20% below the lowest price of
the price range disclosed by the issuer in its effective registration
statement. In the case of the Rules 4753(a)(3)(A) and 4753(b)(2) such
price, which is the minimum price at which the Cross will occur, will
serve as the fourth tie-breaker where there are multiple prices that
would satisfy the conditions for determining the auction price, as
described above. Nasdaq believes that this proposal to resolve a
potential tie among the prices that satisfy all other requirements in
the Cross, by choosing the price that is closest to the price that is
20% below the range, is consistent with Section 6(b)(5) of the Act
because it is designed to protect investors by providing them with the
most advantageous offering price among possible alternative prices.
    Nasdaq also believes that the proposal, by eliminating an
impediment to companies using a Direct Listing with a Capital Raise,
will help removing potential impediments to free and open markets
consistent with Section 6(b)(5) of the Exchange Act while also
supporting capital formation.
    Finally, Nasdaq believes that the proposal to clarify several
provisions of the existing rules without changing them is designed to
remove impediments to and perfect the mechanism of a free and open
market because such changes make the rules easier to understand and
apply without changing their substance.

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 amendments would
not impose any burden on competition, but would rather increase
competition. Nasdaq believes that allowing listing venues to improve
their rules enhances competition among exchanges. Nasdaq also believes
that this proposed change will give issuers interested in this pathway
to access the capital markets additional flexibility in becoming a
public company, and in that way promote competition among service
providers, such as underwriters and other advisors, to such companies.

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. 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-2022-027 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-2022-027. 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 such 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-2022-027, and should be submitted
on or before October 13, 2022.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
---------------------------------------------------------------------------

    \46\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20503 Filed 9-21-22; 8:45 am]
BILLING CODE 8011-01-P


UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, DC

Issued by the Department of Transportation on November 8, 2005

   NOTICE OF ACTION TAKEN -- DOCKET OST-2005-22647

________________________________________________________________________
_________________________________

This serves as notice to the public of the action described below, taken
by the Department official indicated (no additional confirming order
will be issued in this matter).

Application of AMERICA WEST AIRLINES, INC. (AMERICA WEST) filed 10/3/05
for:

XX  Exemption for America West for two years under 49 U.S.C. 40109 to
provide the following service:

Scheduled foreign air transportation of persons, property, and mail
between the United States, on the one hand, and Aruba, the Dominican
Republic, Jamaica, and the Netherlands Antilles, on the other hand.
America West also seeks route integration authority to combine this
exemption authority with its other authorities.  America West states
that it plans to offer these services initially on a code share basis
with US Airways, Inc. (US Airways).

Applicant reps: David M. Kirstein<PHONE_NUMBER>    DOT Analyst: Thuy H.
Cooper<PHONE_NUMBER>

	            Howard Kass<PHONE_NUMBER>

D I S P O S I T I O N

XX  Granted (subject to conditions, see below)

The above action granting exemption authority to America West was
effective when taken: November 8, 2005, through November 8, 2007.

Action taken by:   Paul L. Gretch, Director

		    Office of International Aviation

XX  The authority granted is consistent with the aviation agreements
between the United States and Aruba; the United States and the
Netherlands Antilles; the United States and the Dominican Republic of
1986 and the overall state of aviation relations between the United
States and the Dominican Republic; and the United States and Jamaica.

Except to the extent exempted or waived, this authority is subject to
the terms, conditions, and limitations indicated:

XX Holder’s certificates of public convenience and necessity

XX Standard exemption conditions (attached)

Conditions:  The code-share operations conducted under this
authorization are subject to the following conditions:

The code-sharing operations conducted under this authority must comply
with 14 CFR 257 and with any amendment to the Department’s regulations
concerning code-share arrangements that may be adopted.  Notwithstanding
any provisions in the contract between the carriers, our approval here
is expressly conditioned upon the requirements that the subject foreign
air transportation be sold in the name of the carrier holding out such
service in computer reservation systems and elsewhere; that the carrier
selling such transportation (i.e., the carrier shown on the ticket)
accept responsibility for the entirety of the code-share journey for all
obligations established in its contract of carriage with the passenger;
and that the passenger liability of the operating carrier be unaffected;
and

The authority granted here is specifically conditioned so that neither
America West nor US Airways shall give any force or effect to any
contractual provisions between themselves that are contrary to these
conditions.

The route integration authority granted is subject to the condition that
such operations are consistent with the applicable bilateral aviation
agreements.  Furthermore, (a) nothing in the award of the route
integration authority requested should be construed as conferring upon
America West rights (including fifth-freedom intermediate and/or beyond
rights) to serve markets where U.S. carrier entry is limited unless
America West first notifies the Department of its intent to serve such a
market and unless and until the Department has completed any necessary
carrier selection procedures to determine which carrier(s) should be
authorized to exercise such rights; and (b) should there be a request by
any carrier to use the limited-entry route rights that are included in
America West’s authority by virtue of the route integration authority
granted here, but that are not then being used by America West, the
holding of such authority by route integration will not be considered as
providing any preference America West in a competitive carrier selection
proceeding to determine which carrier(s) should be entitled to use the
authority at issue.

________________________________________________________________________
___

On the basis of data officially noticeable under Rule 24(g) of the
Department's regulations, we found the applicants qualified to provide
the exemption services authorized.

Under authority assigned by the Department in its regulations, 14 CFR
Part 385, we found that (1) our action was consistent with Department
policy; (2) grant of the authority was consistent with the public
interest; and (3) grant of the authority would not constitute a major
regulatory action under the Energy Policy and Conservation Act of 1975.
To the extent not granted, we denied all requests in the referenced
Docket.  We may amend, modify, or revoke the authority granted in this
Notice at any time without hearing at our discretion.

Persons entitled to petition the Department for review of the action set
forth in this Notice under the Department’s regulations, 14 CFR
§385.30, may file their petitions within seven (7) days after the date
of issuance of this Notice.  This action was effective when taken, and
the filing of a petition for review will not alter such effectiveness.

An electronic version of this document is available on the World Wide
Web at:

  HYPERLINK "http://dms.dot.gov//reports/reports_aviation.asp"
http://dms.dot.gov//reports/reports_aviation.asp

U.S. Carrier Exemption Conditions

In the conduct of the operations authorized, the U.S. carrier
applicant(s) shall:

(1)  Hold at all times effective operating authority from the government
of each country served;

(2)  Comply with applicable requirements concerning oversales contained
in 14 CFR 250 (for scheduled operations, if authorized);

(3)  Comply with the requirements for reporting data contained in 14 CFR
241;

(4)  Comply with requirements for minimum insurance coverage, and for
certifying that coverage to the Department, contained in 14 CFR 205;

(5)  Except as specifically exempted or otherwise provided for in a
Department Order, comply with the requirements of 14 CFR 203, concerning
waiver of Warsaw Convention liability limits and defenses;

(6)  Comply with all applicable requirements of the Federal Aviation
Administration and with all applicable U.S. Government requirements
concerning security, including, but not limited to, 49 CFR Part 1544.
To assure compliance with all applicable U.S. Government requirements
concerning security, the holder shall, before commencing any new service
(including charter flights) to or from a foreign airport, contact its
International Principal Security Inspector (IPSI) to advise the IPSI of
its plans and to find out whether the Transportation Security
Administration has determined that security is adequate to allow such
airport(s) to be served; and

(7)  Comply with such other reasonable terms, conditions, and
limitations required by the public interest as may be prescribed by the
Department of Transportation, with all applicable orders and regulations
of other U.S. agencies and courts, and with all applicable laws of the
United States.

The authority granted shall be effective only during the period when the
holder is in compliance with the conditions imposed above.

05/2004

 America West states that on September 27, 2005, America West Holdings
Corporation merged with US Airways Group, Inc.  As a result, America
West became a subsidiary of US Airways Group.  America West will
continue to operate under its own certificate of public convenience and
necessity and authorities until both America West and US Airways, Inc.
are integrated under a single certificate.

 America West states that it may, in the future, operate America West
registered aircraft to these countries.  US Airways currently holds
underlying exemption authority to serve these markets (see Notices of
Action Taken for Aruba dated March 2, 2004 in Docket OST-2000-7341, for
the Dominican Republic dated July 19, 2004 in Docket OST-2000-7340, for
Jamaica dated March 2, 2004 in Docket OST-1996-1775, and for the
Netherlands Antilles dated October 19, 2004 in Docket OST-2004-18346).
America West also plans to code share on US Airways flights from
Philadelphia and Charlotte to Costa Rica.  America West and US Airways
both already hold underlying exemption authority to serve between the
U.S. and Costa Rica (see Notices of Action Taken for America West dated
August 14, 2003 in Docket OST-2003-15729 and for US Airways dated
October 16, 2002 in Docket OST-2002-13263).

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