[Federal Register Volume 77, Number 16 (Wednesday, January 25, 2012)]
[Rules and Regulations]
[Pages 3590-3598]
[FR Doc No: 2012-1521]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 230

[Release No. 33-9295; File No. S7-31-11]
RIN 3235-AL20

Covered Securities of Bats Exchange, Inc.

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission (``SEC'' or
``Commission'') is adopting an amendment to Rule 146 under Section 18
of the Securities Act of 1933, as amended, (``Securities Act'') to
designate certain securities listed, or authorized for listing, on BATS
Exchange, Inc. (``BATS'' or ``Exchange'') as covered securities for
purposes of Section 18 of the Securities Act. Covered securities under
Section 18 of the Securities Act are exempt from state law registration
requirements. The Commission also is making corrections to the rule
text to reflect name changes.

DATES: Effective Date: February 24, 2012.

FOR FURTHER INFORMATION CONTACT: David R. Dimitrious, Senior Special
Counsel,<PHONE_NUMBER>, Ronesha Butler, Special Counsel, (202) 551-
5629, or Carl Tugberk, Special Counsel,<PHONE_NUMBER>, or Tyler Raimo,
Special Counsel,<PHONE_NUMBER>, Division of Trading and Markets
(``Division''), Commission, 100 F Street NE., Washington, DC 20549-
6628.

SUPPLEMENTARY INFORMATION:

I. Introduction

    In 1996, Congress amended Section 18 of the Securities Act to
exempt from state registration requirements securities listed, or
authorized for listing, on the New York Stock Exchange LLC (``NYSE''),
the American Stock Exchange LLC (``Amex'') (now known as NYSE Amex
LLC),\1\ or the National Market System of The NASDAQ Stock

Market LLC (``Nasdaq/NGM'') \2\ (collectively, the ``Named Markets''),
or any national securities exchange designated by the Commission to
have substantially similar listing standards to those of the Named
Markets.\3\ More specifically, Section 18(a) of the Securities Act
provides that ``no law, rule, regulation, or order, or other
administrative action of any State * * * requiring, or with respect to,
registration or qualification of securities * * * shall directly or
indirectly apply to a security that--(A) is a covered security.'' \4\
Covered securities are defined in Section 18(b)(1) of the Securities
Act to include those securities listed, or authorized for listing, on
the Named Markets, or securities listed, or authorized for listing, on
a national securities exchange (or tier or segment thereof) that has
listing standards that the Commission determines by rule are
``substantially similar'' to those of the Named Markets (``Covered
Securities'').\5\
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    \1\ On October 1, 2008, NYSE Euronext acquired The Amex
Membership Corporation (``AMC'') pursuant to an Agreement and Plan
of Merger, dated January 17, 2008 (the ``Merger''). In connection
with the Merger, NYSE Amex's predecessor, the Amex, a subsidiary of
AMC, became a subsidiary of NYSE Euronext called NYSE Alternext US
LLC (``NYSE Alternext''). See Securities Exchange Act Release No.
58673 (September 29, 2008), 73 FR 57707 (October 3, 2008) (SR-NYSE-
2008-60 and SR-Amex 2008-62) (approving the Merger). In 2009, the
Exchange changed its name from NYSE Alternext to NYSE Amex LLC
(``NYSE Amex''). See Securities Exchange Act Release No. 59575
(March 13, 2009), 74 FR 11803 (March 19, 2009) (SR-NYSEALTR-2009-24)
(approving the name change).
    \2\ As of July 1, 2006, the National Market System of The NASDAQ
Stock Market LLC is known as the Nasdaq Global Market (``NGM''). See
Securities Exchange Act Release Nos. 53799 (May 12, 2006), 71 FR
29195 (May 19, 2006) and 54071 (June 29, 2006), 71 FR 38922 (July
10, 2006).
    \3\ See National Securities Markets Improvement Act of 1996,
Pub. L. 104-290, 110 Stat. 3416 (October 11, 1996).
    \4\ 15 U.S.C. 77r(a).
    \5\ 15 U.S.C. 77r(b)(1)(A) and (B). In addition, securities of
the same issuer that are equal in seniority or senior to a security
listed on a Named Market or national securities exchange designated
by the Commission as having substantially similar listing standards
to a Named Market are covered securities for purposes of Section 18
of the Securities Act. 15 U.S.C. 77r(b)(1)(C).
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    Pursuant to Section 18(b)(1)(B) of the Securities Act, the
Commission adopted Rule 146.\6\ Rule 146(b) lists those national
securities exchanges, or segments or tiers thereof, that the Commission
has determined to have listing standards substantially similar to those
of the Named Markets and thus securities listed on such exchanges are
deemed Covered Securities.\7\ BATS has petitioned the Commission to
amend Rule 146(b) to designate certain securities listed on BATS \8\ as
Covered Securities for the purpose of Section 18 of the Securities
Act.\9\
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    \6\ Securities Exchange Act Release No. 39542 (January 13,
1998), 63 FR 3032 (January 21, 1998) (determining that the listing
standards of the Chicago Board Options Exchange, Incorporated
(``CBOE''), Tier 1 of the Pacific Exchange, Inc. (``PCX'') (now
known as NYSE Arca, Inc.), and Tier 1 of the Philadelphia Stock
Exchange, Inc. (``Phlx'') (now known as NASDAQ OMX PHLX LLC) were
substantially similar to those of the Named Markets and that
securities listed pursuant to those standards would be deemed
Covered Securities for purposes of Section 18 of the Securities
Act). In 2004, the Commission amended Rule 146(b) to designate
options listed on the International Securities Exchange, Inc.
(``ISE'') (now known as the International Securities Exchange, LLC)
as Covered Securities for purposes of Section 18(b) of the
Securities Act. See Securities Act Release No. 8442 (July 14, 2004),
69 FR 43295 (July 20, 2004). In 2007, the Commission amended Rule
146(b) to designate securities listed on the Nasdaq Capital Market
(``NCM'') as Covered Securities for purposes of Section 18(b) of the
Securities Act. See Securities Act Release No. 8791 (April 18,
2007), 72 FR 20410 (April 24, 2007).
    \7\ 17 CFR 230.146(b).
    \8\ BATS recently filed an immediately effective rule change to
amend Rule 14.1 of its listing standards to include all securities
listed on the Exchange pursuant to Rule 14.11 as Tier I securities.
Exchange Rule 14.11 sets forth the criteria for listing certain
exchange traded products, including exchange traded funds, portfolio
depository receipts, index fund shares and various other types of
securities (collectively, ``ETPs''). ETPs were not designated as
either Tier I or Tier II securities prior to this amendment. The
Exchange's recent filing modifies the definitions of ``Tier I'' in
Rule 14.1(a)(29), and ``Tier I security'' in Rule 14.1(a)(30), to
make clear that ETPs are considered Tier I securities for purposes
of the Exchange's rules. See Exchange Act Release No. 65809
(November 23, 2011), 76 FR 74079 (November 30, 2011). The Commission
notes that this is only a definitional change. It does not result in
any substantive changes to the Exchange's existing listing standards
that are the subject of this rule amendment.
    \9\ See letter from Eric Swanson, Senior Vice President and
General Counsel, BATS, to Elizabeth M. Murphy, Secretary,
Commission, dated May 26, 2011 (File No. 4-632) (``BATS Petition'').
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    On August 8, 2011, the Commission issued a release proposing to
amend Rule 146(b) to designate certain securities listed, or authorized
for listing, on BATS as covered securities for purposes of Section
18(a) of the Securities Act.\10\ The Commission also proposed to update
certain references in the rule. The Commission received one comment
letter,\11\ which favored amending Rule 146(b) to reflect the name
change of Phlx, as proposed by the Commission. In connection with its
petition, BATS filed a proposed rule change to establish standards for
the listing of securities on BATS.\12\ On August 30, 2011, the
Commission approved this proposed rule change.\13\
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    \10\ Securities Act Release No. 9251 (August 8, 2011), 76 FR
46698 (August 11, 2011) (``Proposing Release'').
    \11\ See letter to Elizabeth M. Murphy, Secretary, Commission,
from Keith Paul Bishop, former California Commissioner of
Corporations, dated August 23, 2011 (``Bishop Letter''). The
commenter concurred with the Commission that Rule 146(b)(1)(iv)
should be updated to reflect the term ``NASDAQ OMX PHLX LLC''
instead of ``the Philadelphia Stock Exchange, Inc.'' The commenter
also requested that the Commission review the current standards of
the PHLX with respect to the listing and trading of securities to
determine whether the current listing standards of PHLX are
substantially similar to standards of Named Market. The Commission
has carefully considered the comment letter, and believes that the
request of the commenter with regard to the listing standards of
Phlx is beyond the scope of the Commission's proposed rule. However,
the Commission notes that, via its oversight, inspection and
enforcement functions, it regularly monitors the operations of
registered exchanges and their compliance with the securities laws
and rules applicable to them.
    \12\ See Securities Exchange Act Release No. 64546 (May 25,
2011), 76 FR 31660 (June 1, 2011) (proposing qualitative and
quantitative listing requirements and standards for securities).
    \13\ Securities Exchange Act Release No. 65225 (August 30,
2011), 76 FR 55148 (September 6, 2011).
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    Based on the approved BATS listing standards and after careful
comparison, the Commission has determined that BATS' listing standards
for Tier I and Tier II securities are substantially similar to the
listing standards of the Named Markets. Accordingly, the Commission
today is amending Rule 146(b) to designate securities listed, or
authorized for listing, on Tier I and Tier II of BATS as Covered
Securities under Section 18(b)(1) of the Securities Act.\14\ Amending
Rule 146(b) to include these securities as Covered Securities will
exempt those securities from state registration requirements as set
forth under Section 18(a) of the Securities Act.\15\ The Commission
also is adopting, as proposed, updated references in the rule.
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    \14\ 15 U.S.C. 77r(b)(1).
    \15\ 15 U.S.C. 77r(a).
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    The Commission notes that the proposed rule text would have
designated any security listed, or authorized for listing, on BATS as a
Covered Security. In light of BATS recent rule amendment defining
``Tier I'' and ``Tier I securities'' to include ETPs,\16\ the
Commission is refining the rule text adopted today to designate those
securities listed on Tier I and Tier II of the Exchange as Covered
Securities. This designation is substantively identical to the proposed
rule text, as the same securities that the Commission proposed to be
designated as Covered Securities in the Proposing Release will be so
designated.
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    \16\ See supra note 8.
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II. Amendment to Rule 146(b) To Include BATS Securities

    Under Section 18(b)(1)(B) of the Securities Act,\17\ the Commission
has the authority to determine that the listing standards of an
exchange, or tier or segment thereof, are substantially similar with
those of the NYSE, NYSE Amex, or Nasdaq/NGM. The Commission initially
compared BATS' listing standards for Tier I and Tier II securities with
those of one of the Named Markets. If the listing standards in a
particular category were not substantially similar to the standards of
that market, the Commission compared BATS' standards to one of the
other two markets.\18\ In addition, as it has done

previously, the Commission interpreted the ``substantially similar''
standard to require listing standards at least as comprehensive as
those of the Named Markets.\19\ If BATS' listing standards were higher
than those of the Named Markets, then the Commission still determined
that BATS' listing standards are substantially similar to those of the
Named Markets.\20\ Finally, the Commission notes that differences in
language or approach would not necessarily lead to a determination that
BATS' listing standards are not substantially similar to those of any
Named Market.\21\
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    \17\ 15 U.S.C. 77r(b)(1)(B).
    \18\ This approach is consistent with the approach that the
Commission has previously taken. See, e.g., Securities Act Release
No. 7494 (January 13, 1998), 63 FR 3032 (January 21, 1998).
    \19\ See id.
    \20\ See Securities Act Release No. 8791, supra note 6.
    \21\ Id.
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    The Commission has reviewed BATS' listing standards for securities
to be listed and traded on BATS and, for the reasons discussed below,
has determined that the standards are substantially similar to those of
a Named Market.\22\ Accordingly, the Commission is amending Rule 146(b)
to include securities listed, or authorized for listing, on Tier I and
Tier II of BATS. Because the Commission has determined BATS'
qualitative listing standards for BATS' Tier I and Tier II securities,
Tier I quantitative listing standards are substantively identical to
the listing standards for Nasdaq/NGM securities (and, therefore, are
``substantially similar'' to a Named Market as required by Section
18(b)(1)(B)),\23\ the discussion below focuses on BATS' Tier II
quantitative listing standards. The Commission included in the
Proposing Release its preliminary view that the Tier I and Tier II
qualitative listing standards and Tier I quantitative listing standards
were substantively identical to the listing standards for Nasdaq/NGM
securities and received no comments on that view.\24\
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    \22\ See generally BATS Chapter XIV; Securities Exchange Act
Release No. 64546, supra note 8, 76 FR 31660. In making its
determination of substantial similarity, as discussed in detail
below, the Commission generally compared BATS' proposed qualitative
listing standards for both Tier I and Tier II securities with
Nasdaq/NGM's qualitative listing standards, BATS' proposed
quantitative listing standards for Tier I securities with Nasdaq/
NGM's quantitative listing standards, and BATS' proposed
quantitative listing standards for Tier II securities with NYSE
Amex's quantitative listing standards.
    \23\ See infra notes 42-49.
    \24\ See Proposing Release at 49699 to 49700 and n. 25 to n. 26.
See id. at 49703 (discussing ETPs).
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A. Primary Equity Securities

    As discussed in the Proposing Release, the Commission preliminarily
believed that BATS' initial listing standards for primary equity
securities listed on Tier II of the Exchange were substantially similar
to those of NYSE Amex's common stock listing standards.\25\ The
Commission has determined that BATS' initial listing standards for
primary equity securities are substantially similar to those of NYSE
Amex. BATS' requirements relating to bid price,\26\ round lot
holders,\27\ shares held by the public,\28\ and required number of
registered and active market makers \29\ are substantially similar to
NYSE Amex requirements. Additionally, BATS' proposed equity,\30\ market
value,\31\ and net income \32\ standards are substantially similar to
NYSE Amex standards.
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    \25\ See Proposing Release at 49700. BATS' use of ``primary
equity securities'' and NYSE Amex's use of ``common stock'' is
simply a difference in nomenclature, as BATS' listing standards
define ``primary equity security'' as a company's first class of
common stock. See BATS Rule 14.1(a)(21).
    \26\ BATS' listing standards require a minimum bid price of $4
per share for initial listing and $1 per share for continued listing
while NYSE Amex requires a minimum bid price of $2-3 per share
depending on the issuer for initial listing and will consider
delisting if the price per share is ``low.'' Compare BATS Rule
14.9(b)(1)(A) with Section 102 of the NYSE Amex Company Guide. The
Commission has interpreted the substantially similar standard to
require listing standards at least as comprehensive as those of the
Named Markets; the Commission may determine that a petitioner's
standards are substantially similar if they are higher, and
differences in language or approach of the listing standards are not
dispositive. See supra notes 19-21 and accompanying text.
    \27\ While BATS' listing standards require at least 300 round
lot holders, NYSE Amex's listing standards require 400 or 800 public
shareholders (depending upon the number of shares held by the
public), or 300 or 600 public shareholders for its alternate listing
standards. The Commission does not believe this difference precludes
a determination of substantial similarity between the standards.
Additionally, BATS' listing standards are identical to the listing
standards of NCM, which the Commission previously found to be
substantially similar to a Named Market. See Securities Act Release
8791, supra note 6 (determining that NCM listing standards, which
are identical to BATS' listing standards for primary equity
securities on Tier II of the Exchange, are substantially similar to
these same Amex standards). With respect to NCM having alternative
listing standards for the number of round lot holders, the
Commission noted that this difference did not preclude a
determination of substantial similarity between the standards. See
Securities Act Release 8791, supra note 6, 72 FR at 20412;
Securities Act Release No. 8754 (November 22, 2006), 71 FR 67762
(November 22, 2006) (proposing that the Commission amend Rule 146(b)
to designate securities listed on the NCM as covered securities for
purposes of Section 18(b) of the Securities Act).
    \28\ BATS' listing standards require a minimum of 1,000,000
publicly held shares while NYSE Amex requires a minimum of 500,000.
Compare BATS Rule 14.9(b)(1)(B) with Section 102(a) of the NYSE Amex
Company Guide. The Commission has interpreted the substantially
similar standard to require listing standards at least as
comprehensive as those of the Named Markets; the Commission may
determine that a petitioner's standards are substantially similar if
they are higher, and differences in language or approach of the
listing standards are not dispositive. See supra notes 17-19 and
accompanying text.
    \29\ BATS' listing requirements require at least three
registered and active market makers while NYSE Amex requires one
specialist to be assigned. Compare BATS Rule 14.9(b)(1)(D) with
Section 202(e) of the NYSE Amex Company Guide. The Commission may
still determine that the petitioner's listing standards are
substantially similar to those of the Named Markets if a
petitioner's listing standards are higher than the Named Markets.
See Securities Act Release No. 8791, supra note 6.
    \30\ BATS' listing standards require a company to have
stockholder equity of at least $5 million, a market value of
publicly held shares of at least $15 million, and a two-year
operating history. See BATS Rule 14.9(b)(2)(A). NYSE Amex requires
stockholder equity of at least $4 million, a market value of
publicly held shares of at least $15 million, and a two-year
operating history.
    \31\ BATS' listing standards require a market value of listed
securities of at least $50 million and a market value of publicly
held shares of at least $15 million, which is the same as required
by NYSE Amex. Compare BATS Rule 14.9(b)(2)(B) with Section
101(c)(2)-(3) of the NYSE Amex Company Guide.
    \32\ BATS' listing standards require net income from continuing
operations of at least $750,000, which is the same as required by
NYSE Amex. Compare BATS Rule 14.9(b)(2)(C) with Section 101(d)(1) of
the NYSE Amex Company Guide.
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    In addition to the above initial listing requirements, BATS
requires that American Depositary Receipts (``ADRs'') comply with an
additional criterion. Specifically, BATS requires there be at least
400,000 ADRs issued for such securities to be initially listed on
BATS.\33\ However, NYSE Amex does not have specific requirements for
ADRs in addition to its initial listing standards for primary equity
securities.\34\ As noted above, the Commission may still determine that
the petitioner's listing standards are substantially similar to those
of the Named Markets if BATS' listing standards are higher than the
Named Markets.\35\ Further, as noted above, differences in language or
approach of listing standards are not dispositive.\36\ The Commission
has determined that the quantitative initial listing standards for
primary equity securities on Tier II of the Exchange are substantially
similar to those of NYSE Amex.
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    \33\ See BATS Rule 14.9(b)(1)(E). This requirement is identical
to NCM. See Nasdaq Rule 5505(a)(5); see generally Securities Act
Release 8791, supra note 6 (determining that NCM listing standards,
which are identical to BATS' standards for primary equity securities
on Tier II of the Exchange, are substantially similar to the Amex
standards).
    \34\ See Section 102 of the NYSE Amex Company Guide. See also
Section 110 of the NYSE Amex Company Guide.
    \35\ See Securities Act Release No. 8791, supra note 6.
    \36\ See id.
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    The Commission has determined that the continued listing
requirements for primary equity securities listed on Tier II of the
Exchange, while not identical, are substantially similar to those of

NYSE Amex.\37\ NYSE Amex's delisting criteria are triggered by poor
financial conditions or operating results of the issuer.\38\
Specifically, NYSE Amex will consider delisting an equity issue if: (i)
Stockholders' equity is less than $2 million and such issuer has
sustained losses from continuing operations and/or net losses in two of
its three most recent fiscal years; (ii) stockholders' equity is less
than $4 million and such issuer has sustained losses from continuing
operations and/or net losses in three of its four most recent fiscal
years; (iii) stockholders' equity is less than $6 million if such
issuer has sustained losses from continuing operations and/or net
losses in its five most recent fiscal years; or (iv) the issuer has
sustained losses which are so substantial in relation to its overall
operations or its existing financial resources, or its financial
condition has become so impaired that it appears questionable, in the
opinion of the exchange, as to whether such company will be able to
continue operations and/or meet its obligations as they mature.\39\
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    \37\ See generally Securities Act Release 8791, supra note 6
(determining that NCM continued listing standards, which are
identical to BATS' continued listing standards for primary equity
securities on Tier II of the Exchange, were substantially similar to
the Amex standards).
    \38\ See generally Sections 1001 through 1006 of the NYSE Amex
Company Guide.
    \39\ See Section 1003(a) of the NYSE Amex Company Guide. While
not identical to NYSE Amex, BATS, as noted below, also has a
shareholder equity standard. See infra note 37 and accompanying
text. NYSE Amex, however, will not normally consider suspending
dealing in (i) through (iii) noted above if the issuer is in
compliance with the following: (1) Total market value of market
capitalization of at least $50,000,000; or total assets and revenue
of $50,000,000 each in its last fiscal year, or in tow of its last
three fiscal years; and (2) the issuer has at least 1,100,000 shares
publicly held, a value of publicly held shares of at least
$15,000,000 and 400 round lot holders. Id.
    NYSE Amex also will consider delisting if: (i) an issuer has
sold or otherwise disposed of its principal operating assets or has
ceased to be an operating company or has discontinued a substantial
portion of its operations or business; (ii) if substantial
liquidation of the issuer has been made; or (iii) if advice has been
received, deemed by the Exchange to be authoritative, that the
security is without value, or in the case of a common stock, such
stock has been selling for a substantial period of time at a low
price. See Section 1003(c) and (f)(v) of the NYSE Amex Company
Guide.
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    Although BATS does not have the same continued listing provisions
for Tier II, BATS also looks at the financial condition and operating
results of the issuer in order to determine whether to delist an
issuer. BATS' continued listing standards for Tier II securities
require compliance with either a (1) shareholder equity, (2) market
value of listed securities or (3) net income standard. Specifically,
for continued listing, BATS requires shareholder's equity of at least
$2.5 million, market value of listed securities of at least $35
million, or net income of $500,000 from continuing operations in the
past fiscal year or two out of three past fiscal years.\40\ Further,
BATS requires an issuer to have (i) a minimum bid price for continued
listing of $1 per share,\41\ (ii) at least two registered and active
market makers, (iii) 300 public holders, and (iv) a minimum number of
publicly held shares of at least 500,000 shares with a market value of
at least $1 million.\42\ The Commission has determined that the
differences in the maintenance criteria for primary equity securities
on BATS for Tier II Securities and common stock listed on NYSE Amex are
not significant and that, taken as a whole, the criteria are
substantially similar.\43\
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    \40\ BATS Rule 14.9(e)(2)(A)-(C). NYSE Amex focuses on a
shareholder equity standard for continued listing. BATS' shareholder
equity standard requires at least $2.5 million shareholders' equity
compared to NYSE Amex's lowest shareholder equity standard of $2
million, if the NYSE Amex issuer has sustained losses from
continuing operations and/or net losses in two of its three most
recent fiscal years. Compare BATS Rule 14.9(e)(2)(A)-(C) with
Section 1003(a) of the NYSE Amex Company Guide.
    \41\ See BATS Rule 14.9(e)(1)(B). Amex will consider delisting
if the price per share is ``low.'' See Section 1003(f)(v) of the
Amex Company Guide. See also Securities Act Release 8791, supra note
6 (noting the same regarding the NCM and Amex bid price standards).
    \42\ BATS Rule 14.9(e)(1)(A)-(E). NYSE Amex will consider
delisting the common stock of an issuer if the aggregate market
value of such publicly held shares is less than $1 million for more
than 90 consecutive days, the number of publicly held shares is less
than 200,000 shares, or the number of its public stockholders is
less than 300. See Section 1003(b) of the NYSE Amex Company Guide.
    \43\ The Commission has interpreted the substantially similar
standard to require listing standards at least as comprehensive as
those of the Named Markets, and differences in language or approach
of the listing standards are not dispositive. See supra notes 17-19
and accompanying text. See also Securities Act Release 8791, supra
note 6 (determining that NCM continued listing standards, which are
identical to BATS' continued listing standards for primary equity
securities on Tier II of the Exchange, are substantially similar to
the Amex standards).
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B. Preferred Stock and Secondary Classes of Common Stock

    The Commission compared the listing standards of preferred stock
and secondary classes \44\ of common stock on Tier II of the Exchange
to the Nasdaq/NGM standards. As discussed in the Proposing Release,\45\
the Commission preliminarily believed that BATS' standards were
substantially similar to those of Nasdaq/NGM. BATS' initial and
continued listing standards with respect to the number of round lot
holders,\46\ bid price,\47\ number of publicly held shares,\48\ market
value of publicly held shares,\49\ and number of market makers \50\ are
substantially similar to the Nasdaq/NGM standards.\51\ As such, the
Commission has determined that BATS' quantitative listing standards for
preferred stock and secondary classes of common stock are substantially
similar to those of Nasdaq/NGM.
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    \44\ A secondary class of common stock is a class of common
stock of an issuer that has another class of common stock listed on
an exchange. See Securities Act Release No. 8791, supra note 6, at
20411.
    \45\ See Proposing Release at 49701 to 49702.
    \46\ BATS' initial and continued listing standards require 100
round lot holders, as Nasdaq/NGM requires. Compare BATS Rule 14.9(c)
with Nasdaq Rule 5510; compare BATS Rule 14.9(f) with Nasdaq Rule
5460(a)(4).
    \47\ While BATS' bid price requirement for initial listing is $4
and the Nasdaq/NGM requirement is $5, the Commission does not
believe this difference is significant. Compare BATS Rule
14.9(c)(1)(A) with Nasdaq Rule 5510(a)(1). See also Securities Act
Release No. 8791, supra note 6, at 20412 n. 28 (determining that an
NCM bid requirement, which is identical to BATS' bid requirement,
was substantially similar to the Nasdaq/NGM requirement). Both BATS'
standard and Nasdaq/NGM's existing standard require a $1 bid price
for continued listing. Compare BATS Rule 14.9(f)(1) with Nasdaq Rule
5460(a)(3).
    \48\ BATS' standard requires 200,000 publicly held shares for
initial listing, and 100,000 publicly held shares for continued
listing, which is the same as Nasdaq/NGM requires. Compare BATS Rule
14.9(c)(1)(C) and 14.9(f)(1)(c) with Nasdaq Rules 5415(a)(1) and
5460(a)(1).
    \49\ BATS' standard for initial listing of preferred stock or a
secondary class of common stock requires a market value of publicly
held shares of at least $3.5 million. Nasdaq/NGM requires a market
value of publicly held shares of at least $4 million. Compare BATS
Rule 14.9(c)(1)(D) with Nasdaq Rule 5415(a)(2). BATS standard for
continued listing requires a market value of publicly held shares of
at least $1 million. Nasdaq/NGM requires a market value of publicly
held shares of at least $1 million for continued listing. Compare
BATS Rule 14.9(f)(1)(D) with Nasdaq Rule 5460(a)(1). The Commission
believes BATS' initial and continued listing standards for preferred
stock and secondary classes of common stock are substantially
similar to Nasdaq/NGM. See also Securities Act Release No. 8791,
supra note 6, at 20411-12 (determining that NCM listing standards,
which are identical to BATS' listing standards for preferred stock
and secondary classes of common stock, are substantially similar to
the Nasdaq/NGM standards).
    \50\ BATS' standards for initial listing require at least three
registered and active market makers, while its continued listing
standards require at least two registered and active market makers.
Nasdaq/NGM requires the same. Compare BATS Rule 14.9(c)(1)(E) with
Nasdaq Rule 5415(a)(2).
    \51\ The Commission notes that these requirements apply to
instances when the common stock or common stock equivalent security
of the issuer is listed on BATS as a Tier II Security or otherwise
is a Covered Security. If the common stock or common stock
equivalent is not listed as a Tier II Security or is a Covered
Security, then the security would be required to meet the initial
primary equity listing requirements for Tier II noted above. Nasdaq/
NGM contains a similar requirement. Compare BATS Rule 14.9(f)(2)
with Nasdaq Rule 5460(b).

---------------------------------------------------------------------------

C. Warrants

    The Commission compared BATS' listing standards for warrants to
Nasdaq/NGM's standards. In the Proposing Release, the Commission stated
that it preliminarily believed that the BATS' standards were
substantially similar to the Nasdaq/NGM standards.\52\ BATS' initial
listing standards require that 400,000 warrants be outstanding for
initial listing, and that there be at least three registered and active
market makers and 400 round lot holders.\53\ Nasdaq/NGM's standards are
identical except that Nasdaq/NGM requires 450,000 warrants to be
outstanding.\54\ Though not identical with respect to the number of
warrants outstanding standard, the Commission believes that the Nasdaq/
NGM higher listing standards do not preclude a finding of substantial
similarity. BATS' initial listing standards also require the issuer's
underlying security to be listed on the Exchange or be a Covered
Security.\55\ The Commission notes that Nasdaq/NGM has a similar
standard that the underlying security be listed on Nasdaq/NGM or be a
Covered Security and believes BATS' standard is substantially similar
to Nasdaq/NGM.\56\ Therefore, the Commission has determined that BATS'
initial listing standards for warrants are substantially similar to
those of Nasdaq/NGM.\57\
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    \52\ See Proposing Release at 49702.
    \53\ See BATS Rule 14.9(d)(1)(A), (C) and (D).
    \54\ See Nasdaq Rule 5410(a), (c) and (d).
    \55\ See BATS Rule 14.9(d)(1)(B).
    \56\ See Nasdaq Rule 5410(b).
    \57\ See also Securities Act Release 8791, supra note 6
(determining that NCM initial listing standards, which are identical
to BATS' standards for warrants on Tier II of the Exchange, are
substantially similar to the Amex standards).
---------------------------------------------------------------------------

    As discussed in the Proposing Release, the Commission also
preliminarily believed that BATS' continued listing requirements for
warrants that there be two registered and active market makers (one of
which may be a market maker entering a stabilizing bid) and that the
underlying security remain listed on the Exchange or be a Covered
Security were substantially similar to that of Nasdaq/NGM.\58\ The
Commission has determined that BATS' continued listing standards for
warrants are substantially similar to those of Nasdaq/NGM.
---------------------------------------------------------------------------

    \58\ See Proposing Release at 49702. Compare proposed BATS' Rule
14.9(g)(1) with Nasdaq Rule 5455(1) and (2).
---------------------------------------------------------------------------

D. Index Warrants

    For index warrants traded on BATS, BATS has the same standards
(both initial and continuing) that apply to index warrants traded on
Nasdaq/NGM.\59\ Therefore, the Commission has determined that the
listing standards for index warrants traded on BATS are substantially
similar to the standards applicable to index warrants traded on the
Nasdaq/NGM market.
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    \59\ Compare BATS Rule 14.9(d)(3) with Nasdaq Rule 5725.
---------------------------------------------------------------------------

E. Convertible Debt

    The Commission has compared BATS' listing standards for convertible
debt to NYSE Amex's listing standards for debt, and preliminarily
believed that BATS' initial listing standards for convertible debt were
substantially similar to those of NYSE Amex. BATS' listing standards
for convertible debt, regarding the threshold principal amount
outstanding,\60\ the availability of current last sale information,\61\
and number of market makers \62\ are substantially similar to NYSE Amex
standards.\63\ In addition to the requirements noted above, BATS'
listing standards require that one of four additional conditions be met
for listing of convertible debt. Specifically, BATS will not list a
convertible debt security unless one of the following conditions is
met: (i) The issuer of the debt security also has equity securities
listed on the Exchange, NYSE Amex, the NYSE, or Nasdaq/NGM; (ii) an
issuer of equity securities listed on the Exchange, NYSE Amex, the
NYSE, or Nasdaq/NGM directly or indirectly owns a majority interest in,
or is under common control with, the issuer of the debt security, or
has guaranteed the debt security; (iii) a nationally recognized
securities rating organization (an ``NRSRO'') has assigned a current
rating to the debt security that is no lower than an S&P Corporation
``B'' rating or equivalent rating by another NRSRO; or (iv) if no NRSRO
has assigned a rating to the issue, an NRSRO has currently assigned an
investment grade rating to an immediately senior issue or a rating that
is no lower than an S&P Corporation ``B'' rating, or an equivalent
rating by another NRSRO, to a pari passu or junior issue.\64\
Therefore, the Commission has determined that BATS' listing standards
for convertible debt are substantially similar to those of NYSE Amex.
---------------------------------------------------------------------------

    \60\ BATS' rule requires a principal amount outstanding of at
least $10 million for initial listing and $5 million for continued
listing. See BATS Rule 14.9(d)(2)(A) and 14.9(g)(2)(A). NYSE Amex
requires a principal amount outstanding of at least $5 million for
initial listing and will consider delisting if the principal amount
outstanding is less than $400,000 or if the issuer is not able to
meet its obligations on the listed debt security. See Sections 104
and 1003 of the NYSE Amex Company Guide. As the Commission noted in
a prior release, while these requirements are not identical, the
Commission believes that both standards are designed to ensure the
continued liquidity of the debt security, and, thus, are
substantially similar. See Securities Act Release 8791, supra note
6, at 20412 (finding that an identical NCM listing standard was
substantially similar to the Amex standard).
    \61\ Both BATS and NYSE Amex include an initial listing
requirement that there be current last sale information available in
the United States with respect to the underlying security into which
the bond or debenture is convertible. Compare BATS Rule
14.9(d)(2)(B) with Section 104 of the NYSE Amex Company Guide.
Additionally, Section 1003(e) of the NYSE Amex Company Guide states
that convertible bonds will be reviewed when the underlying security
is delisted and will be delisted when the underlying security is no
longer the subject of real-time reporting in the United States.
BATS' continued listing standards for a convertible debt security
also require that current last sale information be available in the
United States with respect to the underlying security, whereas NYSE
Amex does not. Compare BATS Rule 14.9(g)(2)(C) with Section 1003(e)
of the NYSE Amex Company Guide.
    \62\ BATS' standard requires at least three registered and
active market makers for initial listing and two registered and
active market makers for continued listing (one of which may be a
market maker entering a stabilizing bid), whereas NYSE Amex requires
one specialist to be assigned. Compare BATS Rule 14.9(d)(1)(C) with
NYSE Amex Rule 104.
    \63\ NYSE Amex will not list a convertible debt issue containing
a provision which gives an issuer discretion to reduce the
conversion price unless the issuer establishes a minimum 10-day
period within which such price reduction will be in effect. See
Section 104 of the NYSE Amex Company Guide. The Commission believes
that omission of such a provision does not impact its determination.
See Securities Act Release Nos. 39542, supra note 6 (finding PCX
listing standards to be substantially similar to Amex even with the
absence of this provision); 8791, supra note 6, at 20412 (finding
NCM's listing standard, which is identical to BATS' listing standard
for convertible debt, was substantially similar to Amex even with
the absence of this provision).
    \64\ These standards are identical to the initial listing
standards for convertible debt securities on NYSE Amex and NCM).
Compare BATS Rule 14.9(d)(2)(D)(iv) with Section 104(A)-(E) of the
NYSE Amex Company Guide and Nasdaq Rule 5515(b)(4).
---------------------------------------------------------------------------

F. Units

    The listing requirements for units on Tier II of the Exchange, NYSE
Amex, and Nasdaq/NGM are all the same, as each evaluates the initial
and continued listing of a unit by looking to its components.\65\ If
all of the components of a unit individually meet the standards for
listing, then the unit would meet the standards for listing.\66\
Because the components for units

proposed by BATS are substantially similar to those of a Named Market,
as discussed above, the Commission has determined that BATS' listing
standards for units to be listed on Tier II of the Exchange are
substantially similar to a Named Market.\67\
---------------------------------------------------------------------------

    \65\ A unit is a type of security consisting of two or more
different types of securities (e.g., a combination of common stocks
and warrants). See, e.g., Securities Exchange Act Release No. 48464
(September 9, 2003), 68 FR 54250 (September 16, 2003) (order
approving NYSE Amex proposed rule change to amend Sections 101 and
1003 of the NYSE Amex Company Guide to clarify the listing
requirements applicable to units).
    \66\ See generally BATS Rule 14.4, Section 101(f) of the NYSE
Amex Company Guide, and Nasdaq Rule 5225.
    \67\ See Securities Exchange Act Release No. 64546, supra note
11, 76 FR 31660 at 31664.
---------------------------------------------------------------------------

    The Commission is amending Rule 146(b) as proposed to reflect the
following name changes:
     Sections (b)(1) and (b)(2) of Rule 146 use the term
``Amex'' to refer to the American Stock Exchange LLC. As noted above,
on October 1, 2008, NYSE Euronext acquired Amex and renamed it NYSE
Alternext.\68\ Further, in 2009, NYSE Alternext was renamed NYSE Amex
LLC.\69\ The Commission is making a conforming change to Rule 146(b).
---------------------------------------------------------------------------

    \68\ See Securities Exchange Act Release No. 58673, supra note
1.
    \69\ See Securities Exchange Act Release No. 59575, supra note
1.
---------------------------------------------------------------------------

     Section (b)(1) of Rule 146 refers to ``the Philadelphia
Stock Exchange, Inc.'' \70\ On July 24, 2008, The NASDAQ OMX Group,
Inc. acquired Phlx and renamed it ``NASDAQ OMX PHLX LLC.'' \71\ The
Commission is making a conforming change to Rule 146(b).
---------------------------------------------------------------------------

    \70\ See supra note 10.
    \71\ On July 24, 2008, The NASDAQ OMX Group, Inc. acquired Phlx
and renamed it ``NASDAQ OMX PHLX LLC.'' See Securities Exchange Act
Release Nos. 58179 (July 17, 2008), 73 FR 42874 (July 23, 2008) (SR-
Phlx-2008-31); and 58183 (July 17, 2008), 73 FR 42850 (July 23,
2008) (SR-NASDAQ-2008-035).
---------------------------------------------------------------------------

III. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 does not apply because the
amendment to Rule 146(b) does not impose recordkeeping or information
collection requirements or other collection of information, which
require the approval of the Office of Management and Budget under 44
U.S.C. 3501 et seq.

IV. Economic Analysis

A. Introduction

    Section 2(b) of the Securities Act \72\ requires us, when engaging
in rulemaking that requires the Commission to consider or determine
whether an action is necessary or appropriate in the public interest,
to consider, in addition to the protection of investors, whether the
action will promote efficiency, competition and capital formation. We
have considered, and discuss below, the effects of the amendment to
Securities Act Rule 146, with regard to BATS' listing standards to
designate certain securities that will be listed, or authorized for
listing, on BATS as Covered Securities, on efficiency, competition, and
capital formation, as well as the benefits and costs associated with
the rulemaking.
---------------------------------------------------------------------------

    \72\ 15 U.S.C. 77b(b).
---------------------------------------------------------------------------

    Congress amended Section 18 of the Securities Act to exempt covered
securities from state registration requirements. These securities are
listed on the Named Markets or any other national securities exchange
determined by the Commission to have ``substantially similar'' listing
standards to those of the Named Markets (``Designated Markets'').\73\
Consistent with statutory authority, the Commission has determined that
the listing standards for securities listed, or authorized for listing,
on BATS are substantially similar to those of a Named Market,
specifically Nasdaq/NGM or NYSE Amex. Securities listed, or authorized
for listing, on BATS, therefore, will be exempt from state law
registration requirements.
---------------------------------------------------------------------------

    \73\ See 15 U.S.C. 77r(b)(1)(B).
---------------------------------------------------------------------------

    There are three Named Markets (NYSE, NYSE Amex, and Nasdaq/NGM) and
currently five Designated Markets (Tier I of NYSE Arca, Tier I of the
Philadelphia Stock Exchange, CBOE, ISE, and Nasdaq/NCM). NYSE and
Nasdaq/NGM are currently the largest exchanges in terms of number of
securities listed. As of April 19, 2011, in terms of securities listed,
NYSE lists 3,255, Nasdaq/NGM lists 2,854, NYSE Arca lists 1,213, and
NYSE Amex lists 544.\74\
---------------------------------------------------------------------------

    \74\ These listed securities include exchange traded funds and
multiple securities from the same issuer.
---------------------------------------------------------------------------

    The direct economic effect of the rule amendment will be to exempt
issuers that list, or are authorized to list, on BATS from the
requirements of state registration. Instead, these issuers will be
required to comply with BATS' listing standards and the federal
securities laws, rules and regulations with respect to the registration
and sale of securities. The requirements of state registration
typically include: (i) Paperwork and labor hours necessary to comply
with state registration requirements, (ii) meeting the disclosure
standards, and (iii) in some states, meeting certain minimum merit
requirements to make public offerings.\75\ The Commission solicited
comments concerning the costs and benefits associated with the
proposal, but received none.
---------------------------------------------------------------------------

    \75\ It has been noted that the purpose of such review is ``to
prevent `unfair' and `oppressive' offerings of securities,'' and, as
of 2011, merit review is employed in about 30 states. See Jeffrey B.
Bartell & A.A. Sommer, Jr., Blue Sky Registration, Securities Law
Techniques (Matthew Bender ed., 2011). Typical elements of merit
review include: offering expenses, including underwriter's
compensation, rights of security holders, historical ability to
service debt or pay dividends, financial condition of the issuer,
cheap stock held by insiders, the quantity of securities subject to
options and warrants, self-dealing and other conflicts of interest,
and the price at which the securities will be offered. See id. Some
merit regulation would be imposed on these issuers through
application of exchange listing standards.
---------------------------------------------------------------------------

    The Commission believes that an indirect effect of the rule
amendment will be that, by removing the requirements of state
registration for issuers that list, or are authorized to list, on
BATS--the same privilege granted to other Covered Securities--the rule
can improve BATS' ability to compete effectively with other exchanges.
Therefore, the Commission believes an important economic effect of the
rule amendment can be to engender greater competition in the market for
listing services.
    Exchanges generally compete in multiple areas, which include the
market for listing, the market for trading, and the market for order-
flow. This rule amendment and BATS' listing standards \76\ relate
primarily to the market for listing, although the rule amendment and
the entry of a new participant in the listings market could impact
other markets as well.\77\ In the market for listing, exchanges compete
for issuers to list on their exchanges, so that the exchange may
collect listing fees. Domestic exchanges face listing competition from
other domestic exchanges and from foreign exchanges.\78\ The benefit of
listing for issuers generally is to gain greater access to capital
through measures designed to help promote quality certification and
visibility to public investors, which will generally result in a
reduction in the cost of raising capital for these issuers. This access
to capital may be further

enhanced through listing on particular exchanges, which could affect
the level of investors' trust in a listed company's governance
structure and the fairness of trading in the company's securities
(through the perceived effectiveness of exchanges' conduct rules and
surveillance of trading as well as other services and regulatory
functions).
---------------------------------------------------------------------------

    \76\ See Securities Exchange Act Release No. 64546, supra note
11.
    \77\ See, e.g., Thierry Foucault and Christine A. Parlour,
Competition for Listing, 35 R and J. Econ. 329 (2004) (describing
how listing fees and trading costs both affect firms' incentives to
list with one exchange versus another).
    \78\ It has been noted that NYSE and the London Stock Exchange,
for example, compete for listings of firms in third countries, in
particular from emerging economies. See Thomas J. Chemmanur & Paolo
Fulghieri, Competition and Cooperation Among Exchanges: A Theory of
Cross-Listing and Endogenous Listing Standards, 82 J. Fin. Econ.
455, 456 (2006). See generally Craig Doidge, Andrew Karolyi, and
Ren[eacute] Stulz, Has New York Become Less Competitive than London
in Global Markets? Evaluating Foreign Listing Choices Over Time,
Journal of Financial Economics 91, 253-277 (2009); Craig Doidge,
Andrew Karolyi, and Ren[eacute] Stulz, Why Do Foreign Firms Leave
U.S. Equity Markets?, Journal of Finance 65, 1507-1553 (2010);
Caglio, Cecilia, Hanley, Kathleen Weiss and Marietta-Westberg,
Jennifer, Going Public Abroad: The Role of International Markets for
IPOs (March 16, 2010), available at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1572949. Additionally, differences in
regulatory regimes may impact listing decisions.
---------------------------------------------------------------------------

    Exchanges may try to compete for issuers by reducing listing fees
or by improving the quality of services they offer, or both. The cost
of listing for an issuer includes listing fees and the cost of
complying with listing standards. In principle, this means exchanges
can compete by reducing listing fees, by relaxing the listing standards
issuers must meet, or by offering several trading segments with
different listing standards on each, though such standards must be
determined to be substantially similar to a Named Market in order to
get the benefit of the Securities Act Section 18(b)(1)(B) exemption
from state registration requirements. The Commission believes that any
concern that exchanges may try to compete by lowering the listing
standards to attract issuers (and hence enter in a ``race-to-the-
bottom'') is mitigated by the fact that (1) listing standards affect
exchanges' reputations among investors, which, in turn, impacts their
attractiveness to issuers, (2) any proposed listing standards or
proposed changes to existing listing standards must be filed with the
Commission pursuant to Section 19(b) of the Exchange Act and must meet
its requirements to become effective,\79\ and (3) lower listing
standards that are not substantially similar to those of a Named Market
will not have the benefit of the exemption from state registration
requirements.\80\
---------------------------------------------------------------------------

    \79\ Any revision to exchange listing standards must be done in
accordance with Section 19(b) of the Exchange Act and Rule 19b-4
thereunder. Any Commission approval of a listing standard revision
is conditioned upon a finding by the Commission that the revision is
consistent with the requirements of the Exchange Act and rules
thereunder. See 15 U.S.C. 78s.
    \80\ See Chemmanur & Fulghieri, supra note 74, at 458.
---------------------------------------------------------------------------

    The competition among exchanges for listings is only partially
based on price. Exchanges also compete in various other areas, which
contribute to the quality of the services listed issuers receive,
including, but not limited to, provision of trade statistics,
regulatory and surveillance services, access to new technology,
attractive trading mechanisms, and marketing services.
    One important dimension of competition is brand name.\81\ Issuers
place high value on being listed on certain exchanges because investors
may more readily trust those exchanges, which may, in turn, reduce the
cost of raising capital for those issuers. As a result, NYSE and
Nasdaq/NGM, which are already the two largest exchanges in terms of
securities listed, may be able to charge listing fees that are above
marginal cost--that is, what it would cost them to list additional
issuers--and higher than other competing exchanges; therefore, certain
exchanges may earn economic rent from these higher listing premiums
(the amount of fee difference certain exchanges can charge, above a
competitor's price, because of its brand name). In addition to brand
name recognition, the market for listing exhibits positive network
externalities: issuers may prefer to be listed on exchanges where many
other issuers are listed and where there are more intermediaries
trading because of increased liquidity and visibility.\82\ This
indicates that, all else being equal, large exchanges (in terms of
listings) will tend to be favored over smaller ones. In theory, this
preference may persist to some extent even if large exchanges were to
offer slightly inferior services than their smaller counterparts
because the advantages of being listed on a large exchange, where there
are many issuers and intermediaries, might outweigh the cost of being
offered slightly inferior services. Because of these brand name effects
and positive externalities, the Commission believes that the market for
listings, to some extent, exhibits certain barriers to entry for new
entrants to the listing markets, such as BATS.\83\
---------------------------------------------------------------------------

    \81\ See generally Clement G. Krouse, Brand Name as a Barrier to
Entry: The Rea Lemon Case, 51 Southern Econ. J. 495 (1984)
(describing the effect of brand name on competition in markets with
incomplete information); see also Tibor Scitovsky, Ignorance as a
Source of Oligopoly Power, 40 Amer. Econ. Rev. 48, 49 (1950) (``An
ignorant buyer * * * is unable to judge the quality of the products
he buys by their intrinsic merit. Unable to appraise products by
objective standards, he is forced to base his judgment on indices of
quality, such as * * * general reputation of the producing
firms.'').
    \82\ See, e.g., Carmine Di Nola, Competition and Integration
Among Stock Exchanges in Europe: Network Effects, Implicit Mergers
and Remote Access, 7 European Fin. Man. 39 (2001) (``Firms may
derive more utility in being listed on exchanges where there are
more intermediaries as they give more liquidity to the market.'').
    \83\ Brand name recognition is frequently recognized as a
barrier to entry mainly because consumers do not have all the
information regarding product quality and thus tend to rely on brand
names as a proxy for quality. See, e.g., Brand Name as a Barrier to
Entry: The Rea Lemon Case, 51 S. Econ. J. 495 (1984); Tibor
Scitovsky, Ignorance as a Source of Oligopoly Power, 40 Amer. Econ.
Rev. 48 (1950). Network externalities are also recognized as a
barrier to entry. See, e.g., Gregory J. Weden, Network Effects and
Conditions of Entry: Lessons from the Microsoft Case, 69 Antitrust
L.J. 87 (2001); Douglas A. Melamed, Network Industries and
Antitrust, 23 Harv. J. L. & Pub. Pol'y 147 (1999).
---------------------------------------------------------------------------

B. Benefits, Including the Impact on Efficiency, Competition, and
Capital Formation

    By exempting securities listed, or authorized for listing, on BATS
from state law registration requirements, the Commission believes that
issuers seeking to list securities on BATS could have the benefit of
reduced regulatory compliance burdens, as compliance with state blue
sky law requirements will not be required. One benefit of this
amendment will be to eliminate these compliance burdens with respect to
securities listed, or authorized for listing, on BATS. The Commission
expects that the rule amendment can improve efficiency by eliminating
duplicative registration costs for issuers and improving liquidity by
allowing for greater market access to issuers who have not been listed
previously.
    To the extent that state merit reviews may have inhibited certain
smaller businesses from making public offerings,\84\ the Commission
believes an exemption from state registration requirements will
facilitate capital formation.
---------------------------------------------------------------------------

    \84\ A number of scholarly articles have expressed concerns over
the possibility for blue sky merit regulation to hinder capital
formation. See, e.g., Martin Fojas, Ay Dios NSMIA!: Proof of a
Private Offering Exemption Should Not Be a Precondition for
Preempting Blue Sky Law Under the National Securities Markets
Improvement Act, 74 Brooklyn L. Rev. 477 (2009); Rutheford B.
Campbell, Jr., Blue Sky Laws and the Recent Congressional Preemption
Failure, 22 J. Corp. L. 175 (1997); Brian J. Fahrney, State Blue Sky
Laws: A Stronger Case for Federal Pre-Emption Due to Increasing
Internationalization of Securities Markets, Comment, 86 Nw. U. L.
Rev. 753 (1991-92); Roberta S. Karmel, Blue-Sky Merit Regulation:
Benefit to Investors or Burden on Commerce, 53 Brook. L. Rev. 106
(1987-88). While the concerns are numerous, other studies have shown
some positive effect of merit regulation. See Jay T. Brandi, The
Silverlining in Blue Sky Laws: The Effect of Merit Regulation on
Common Stock Returns and Market Efficiency, 12 J. Corp. L. 713
(1986-87) (reporting that merit regulation can have a positive
effect on investor returns); Ashwini K. Agrawal, ``The Impact of
Investor Protection Law on Corporate Policy: Evidence from the Blue
Sky Laws,'' working paper (2009) (reporting that the passage of
investor protection statutes causes firms to pay out greater
dividends, issue more equity, and grow in size), available at http://ssrn.com/abstract=1442224. Some merit regulation would be imposed
on these issuers through application of exchange listing standards.
---------------------------------------------------------------------------

    The Commission believes that the amendment to Rule 146(b) should
permit BATS to better compete for listings with other markets whose
listed securities already are exempt from state law registration
requirements, and the Commission believes that this result can enhance
competition, thus benefiting market participants and the public.
Specifically, BATS currently intends to enter the listing market with
generally lower fees than incumbent exchanges in

order to compete with them.\85\ In response to BATS' entry, although
recognizing the significant barriers to entry noted above, the
incumbent exchanges might choose to reduce their listing fees to match
or come closer to those proposed by BATS. Incumbent exchanges might
also enhance the other services they provide to their currently listed
issuers (e.g., regulatory and surveillance services, access to new
technology, attractive trading mechanisms, marketing services) as a way
to counteract BATS' lower listing fees.
---------------------------------------------------------------------------

    \85\ See Securities Exchange Act Release No. 64546, supra note
11, 76 FR at 31666 & n. 27-28 (representing that BATS' pricing,
while not necessarily cheaper for all issuers at all other markets,
is roughly equivalent to or less than the price issuers would pay at
other exchanges, including NGM and NCM).
---------------------------------------------------------------------------

    The Commission believes that additional competition in the market
for listings can enable some issuers, both public and private, that
have (1) either not listed on any exchange or (2) have listed on an
exchange but have chosen not to list on certain exchanges because of
the costs of listing there, to list on any Named or Designated Market
due to the potential for lower listing fees across all exchanges. The
Commission further believes that this will result in a lower cost of
capital for those issuers that previously had not listed on an exchange
and could benefit the current investors in such issuers in the form of
higher company value arising from the reduced cost of capital and
increased liquidity. Since currently unlisted firms may be able to list
because of lower listing fees, the Commission believes this may improve
efficiency and capital formation since future investors in these
issuers would have easier access to invest in them and to further
diversify their investment portfolios.
    The Commission believes that those issuers that are currently
listed on an exchange, including the Named Markets, and that remain
listed there, can potentially benefit from any reduced listing fees;
however, because any such benefit will come at the expense of the
exchange on which they are listed in the form of potentially reduced
profit, this aggregate effect would be a transfer from one group of
investors (exchange shareholders) to another group of investors (listed
issuer shareholders).
    Additionally, the Commission believes that some issuers currently
listed on other Named or Designated Markets could potentially switch
their listings to BATS, thus potentially lowering their listing costs
(provided the Named or Designated Markets do not reduce their listing
fees). The size of any such potential benefit will depend on how large
any cost savings due to listing on BATS would be in comparison to the
cost of giving up any valuable services that the other exchanges might
provide that BATS might not. In addition, the behavior of these issuers
will depend heavily on the extent to which these other exchanges
respond to BATS' entry by making themselves more competitive to the
issuers.

C. Costs, Including the Impact on Efficiency, Competition, and Capital
Formation

    The rule amendment will eliminate state registration requirements
for securities listed, or authorized for listing, on BATS. The
Commission notes that there may be certain economic costs to investors
through the loss of benefits of state registration and oversight. For
example, by listing on BATS, issuers will no longer be required to
comply with certain states' blue sky laws, which could mandate more
detailed disclosure than BATS' listing standards and the requirements
imposed pursuant to the federal securities laws, rules, and
regulations. In such circumstances, investors could lose the benefit of
the additional information. Additionally, to the extent blue sky laws
result in additional enforcement protections in the form of another
regulator policing issuer activity, then investors from these states
could incur costs when issuers choose to list on BATS. Some researchers
have also expressed a concern that the exemption from blue sky laws
could prompt riskier public offerings.\86\
---------------------------------------------------------------------------

    \86\ See, e.g., Brandi, supra note 84.
---------------------------------------------------------------------------

    From the perspective of competition in the market for listing, the
Commission notes that there could be a concern that, to the extent the
market for exchange services exhibits network effects, as explained
above, there could be a loss in efficiency as a result of having a
greater number of networks, if one or more of the existing large
exchanges (in terms of listings) shrinks in size. However, the
Commission also notes that the overall efficiency effect will depend on
the precise fragmentation of the exchanges. It is possible, for
instance, that, through specialization of exchanges, there could be an
efficiency gain from having more distinct exchanges, each of which
specializes in listing issuers from certain types of industries.
    The Commission acknowledges that these costs are difficult to
quantify. The Commission believes that Congress contemplated these
costs in relation to the economic benefits of exempting Covered
Securities from state regulation. The rule amendment otherwise imposes
no recordkeeping or compliance burdens, but will provide a limited
purpose exemption under the federal securities laws. The Commission
solicited comments on the rule amendment's effect on competition,
efficiency, and capital formation, but received none. Thus, the
Commission believes that the amendment to Rule 146(b) should not impair
efficiency, competition, and capital formation.

V. Regulatory Flexibility Act Certification

    The Commission certified, pursuant to Section 605(b) of the
Regulatory Flexibility Act,\87\ that the amendment to Rule 146 will not
have a significant economic impact on a substantial number of small
entities. This certification was included in the Proposing Release.\88\
The Commission solicited comments as to the nature of any impact on
small entities, and generally on whether the amendment to Rule 146(b)
could have an effect that has not been considered. No comments on these
issues were received.
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    \87\ 5 U.S.C. 605(b).
    \88\ See Proposing Release at 49706.
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VI. Statutory Authority and Text of the Rule

    The Commission is adopting an amendment to Rule 146 pursuant to the
authority of Section 19(a) of the Securities Act of 1933 \89\
particularly Sections 18(b)(1)(B) and 19(a).\90\
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    \89\ 15 U.S.C. 77a et seq.
    \90\ 15 U.S.C. 77r(b)(1)(B) and 77s(a).
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List of Subjects in 17 CFR Part 230

    Securities.

    For the reasons set forth in the preamble, Title 17, Chapter II of
the Code of Federal Regulations is amended as follows:

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
1. The authority citation for Part 230 continues to read, in part, as
follows:

    Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r,
77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78t, 78w,
78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-37,
and Pub. L. 111-203, Sec.  939A, 124 Stat. 1376, (2010) unless
otherwise noted.
* * * * *
0
2. Section 230.146 is amended by revising paragraphs (b)(1) and (b)(2)
to read as follows:

Sec.  230.146  Rules under section 18 of the Act.

* * * * *
    (b) * * *
    (1) For purposes of Section 18(b) of the Act (15 U.S.C. 77r), the
Commission finds that the following national securities exchanges, or
segments or tiers thereof, have listing standards that are
substantially similar to those of the New York Stock Exchange
(``NYSE''), the NYSE Amex LLC (``NYSE Amex''), or the National Market
System of the Nasdaq Stock Market (``Nasdaq/NGM''), and that securities
listed, or authorized for listing, on such exchanges shall be deemed
covered securities:
    (i) Tier I of the NYSE Arca, Inc.;
    (ii) Tier I of the NASDAQ OMX PHLX LLC;
    (iii) The Chicago Board Options Exchange, Incorporated;
    (iv) Options listed on the International Securities Exchange, LLC;
    (v) The Nasdaq Capital Market; and
    (vi) Tier I and Tier II of BATS Exchange, Inc.
    (2) The designation of securities in paragraphs (b)(1)(i) through
(vi) of this section as covered securities is conditioned on such
exchanges' listing standards (or segments or tiers thereof) continuing
to be substantially similar to those of the NYSE, NYSE Amex, or Nasdaq/
NGM.
* * * * *

    By the Commission.

    Dated: January 20, 2012.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-1521 Filed 1-24-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 111 (Tuesday, June 9, 2020)]
[Notices]
[Pages 35298-35299]
[FR Doc No: 2020-12462]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. ER20-1970-000]

Diamond Spring, LLC; Supplemental Notice That Initial Market-
Based Rate Filing Includes Request for Blanket Section 204
Authorization

    This is a supplemental notice in the above-referenced Diamond
Spring, LLC's application for market-based rate authority, with an
accompanying rate tariff, noting that such application includes a
request for blanket authorization, under 18 CFR part 34, of future
issuances of securities and assumptions of liability.
    Any person desiring to intervene or to protest should file with the
Federal Energy Regulatory Commission, 888 First Street NE, Washington,
DC 20426, in accordance with Rules 211 and 214 of the Commission's
Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone
filing a motion to intervene or protest must serve a copy of that
document on the Applicant.
    Notice is hereby given that the deadline for filing protests with
regard to the applicant's request for blanket authorization, under 18
CFR part 34, of future issuances of securities and assumptions of
liability, is June 23, 2020.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper, using the FERC Online links at http://www.ferc.gov. To facilitate electronic service, persons with internet
access who will eFile a document and/or be listed as a contact for an
intervenor must create and validate an eRegistration account using the
eRegistration link. Select the eFiling link to log on and submit the
intervention or protests.
    Persons unable to file electronically may mail similar pleadings to
the Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426. Hand delivered submissions in docketed
proceedings should be delivered to Health and Human Services, 12225
Wilkins Avenue, Rockville, Maryland 20852.
    In addition to publishing the full text of this document in the
Federal Register, the Commission provides all

interested persons an opportunity to view and/or print the contents of
this document via the internet through the Commission's Home Page
(http://ferc.gov) using the eLibrary link. Enter the docket number
excluding the last three digits in the docket number field to access
the document. At this time, the Commission has suspended access to the
Commission's Public Reference Room, due to the proclamation declaring a
National Emergency concerning the Novel Coronavirus Disease (COVID-19),
issued by the President on March 13, 2020. For assistance, contact the
Federal Energy Regulatory Commission at<EMAIL_ADDRESS>or
call toll-free,<PHONE_NUMBER> or TYY,<PHONE_NUMBER>.

    Dated: June 3, 2020.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2020-12462 Filed 6-8-20; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 80, Number 155 (Wednesday, August 12, 2015)]
[Proposed Rules]
[Pages 48280-48281]
[FR Doc No: 2015-19720]

=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R04-OAR-2015-0336; FRL-9932-24-Region 4]

Approval and Promulgation of Implementation Plans; Florida;
Miscellaneous Changes

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to
approve the State Implementation Plan (SIP) revision submitted by the
State of Florida through the Florida Department of Environmental
Protection (FDEP) on May 1, 2015. This SIP revision seeks to make
changes to the SIP to remove certain Stage I vapor control requirements
and to make administrative changes to the SIP that would remove
gasoline vapor control rules that no longer serve a regulatory purpose,
including rules related to the Stage II vapor control requirements for
new and upgraded gasoline dispensing facilities in Broward, Miami-Dade,
and Palm Beach Counties (hereinafter referred to as the ``Southeast
Florida Area''). EPA has preliminarily determined that Florida's May 1,
2015, SIP revision is approvable because it is consistent with the
Clean Air Act (CAA or Act). In the Final Rules Section of this Federal
Register, EPA is approving the State's implementation plan revision as
a direct final rule without prior proposal because the Agency views
this as a noncontroversial submittal and anticipates no adverse
comments. A detailed rationale for the approval is set forth in the
direct final rule. If EPA receives adverse comments, the direct final
rule will be withdrawn and all public comments received will be
addressed in a subsequent final rule based on this proposed rule.

DATES: Written comments must be received on or before September 11,
2015.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R04-
OAR-2015-0336 by one of the following methods:
    1. www.regulations.gov: Follow the on-line instructions for
submitting comments.
    2. Email<EMAIL_ADDRESS>    3. Fax:<PHONE_NUMBER>.
    4. Mail: ``EPA-R04-OAR-2015-0336'' Air Regulatory Management
Section (formerly Regulatory Development Section), Air Planning and
Implementation Branch (formerly Air Planning Branch), Air, Pesticides
and Toxics Management Division, U.S. Environmental Protection Agency,
Region 4, 61 Forsyth Street SW., Atlanta, Georgia 30303-8960.
    5. Hand Delivery or Courier: Ms. Lynorae Benjamin, Chief, Air
Regulatory Management Section, Air Planning and Implementation Branch,
Air, Pesticides and Toxics Management Division, U.S.

Environmental Protection Agency, Region 4, 61 Forsyth Street SW.,
Atlanta, Georgia 30303-8960. Such deliveries are only accepted during
the Regional Office's normal hours of operation. The Regional Office's
official hours of business are Monday through Friday, 8:30 a.m. to 4:30
p.m., excluding Federal holidays. Please see the direct final rule
which is located in the Rules section of this Federal Register for
detailed instructions on how to submit comments.

FOR FURTHER INFORMATION CONTACT: Kelly Sheckler, Air Regulatory
Management Section, Air Planning and Implementation Branch, Air,
Pesticides and Toxics Management Division, U.S. Environmental
Protection Agency, Region 4, 61 Forsyth Street SW., Atlanta, Georgia
30303-8960. Ms. Sheckler's phone number is<PHONE_NUMBER>. She can also
be reached via electronic mail at<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: For additional information see the direct
final rule which is published in the Rules Section of this Federal
Register. A detailed rationale for the approval is set forth in the
direct final rule. If no adverse comments are received in response to
this rule, no further activity is contemplated. If EPA receives adverse
comments, the direct final rule will be withdrawn and all public
comments received will be addressed in a subsequent final rule based on
this proposed rule. EPA will not institute a second comment period on
this document. Any parties interested in commenting on this document
should do so at this time.

    Dated: July 30, 2015.
Heather McTeer Toney
Regional Administrator, Region 4.
[FR Doc. 2015-19720 Filed 8-11-15; 8:45 am]
 BILLING CODE 6560-50-P


[Federal Register Volume 78, Number 132 (Wednesday, July 10, 2013)]
[Notices]
[Page 41413]
[FR Doc No: 2013-16472]

=======================================================================
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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-4085-DR; Docket ID FEMA-2013-0001]

New York; Amendment No. 10 to Notice of a Disaster Declaration

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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SUMMARY: This notice amends the notice of a major disaster declaration
for State of New York (FEMA-4085-DR), dated October 30, 2012, and
related determinations.

DATES: Effective Date: June 24, 2013.

FOR FURTHER INFORMATION CONTACT: Dean Webster, Office of Response and
Recovery, Federal Emergency Management Agency, 500 C Street SW.,
Washington, DC 20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: The Federal Emergency Management Agency
(FEMA) hereby gives notice that pursuant to the authority vested in the
Administrator, under Executive Order 12148, as amended, Willie G. Nunn,
of FEMA is appointed to act as the Federal Coordinating Officer for
this disaster.
    This action terminates the appointment of Michael F. Byrne as
Federal Coordinating Officer for this disaster.

    The following Catalog of Federal Domestic Assistance Numbers
(CFDA) are to be used for reporting and drawing funds: 97.030,
Community Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis
Counseling; 97.033, Disaster Legal Services; 97.034, Disaster
Unemployment Assistance (DUA); 97.046, Fire Management Assistance
Grant; 97.048, Disaster Housing Assistance to Individuals and
Households In Presidentially Declared Disaster Areas; 97.049,
Presidentially Declared Disaster Assistance--Disaster Housing
Operations for Individuals and Households; 97.050, Presidentially
Declared Disaster Assistance to Individuals and Households--Other
Needs; 97.036, Disaster Grants--Public Assistance (Presidentially
Declared Disasters); 97.039, Hazard Mitigation Grant.

W. Craig Fugate,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2013-16472 Filed 7-9-13; 8:45 am]
BILLING CODE 9111-23-P