Nasdaq approved as an Exchange by SEC

By: Cydney Posner

On Friday, the SEC approved the Nasdaq Stock Market LLC’s application to become a registered national securities exchange. The Nasdaq Stock Market is only the third exchange to register with the SEC in over 30 years.

Previously, Nasdaq was operated under the supervision and control of the NASD. As a registered exchange, Nasdaq now becomes a self-regulatory organization in its own right, responsible for its own and its members compliance with the federal securities laws. Under an agreement with Nasdaq, the NASD will continue to perform certain regulatory functions on Nasdaq's behalf. However, Nasdaq retains the ultimate responsibility to ensure that its regulatory obligations are fulfilled.

The SEC notes that, although Nasdaq is now a registered exchange, the commencement of its operations as an exchange and its independence from ongoing control by the NASD, are conditioned upon the prior satisfaction of several requirements, including the declaration by the SEC of the effectiveness of certain regulatory plans to be filed by Nasdaq.

Once the Nasdaq Exchange begins operations as a national securities exchange, a security will be considered for listing on the Nasdaq Exchange only if it is registered pursuant to Section 12(b) of the Exchange Act or if it is subject to an exemption. An issuer may register a security pursuant to Section 12(b) by submitting to the Nasdaq Exchange a listing application that provides certain required information. The Exchange will review the listing application and, if the listing application is approved, will certify to the SEC that it has approved the security for listing and registration. Registration of the security will become effective 30 days after the receipt of the certification by the SEC or within such shorter period of time as the SEC may determine. Once registration is effective, the security is eligible for listing on the Nasdaq Exchange. Nasdaq has notified SEC staff of its intent to request appropriate regulatory relief to facilitate the efficient registration of its issuers’ securities under Section 12(b) of the Exchange Act. The SEC expects that any such process would include a notice by Nasdaq to the general public and an appropriate notice to issuers, and an opportunity for issuers to opt out of the process. Note that certain issuers currently listed on Nasdaq are not required to register under Section 12(g), for example, as a result of exemptions provided to foreign private issuers. These issuers, however, are not similarly exempt from Section 12(b) of the Exchange Act.

Nasdaq has proposed that its initial and continuing listing standards be largely the same as current NASD listing rules. Nasdaq has also proposed a transitional listing rule that would automatically qualify for initial listing any security trading on the Nasdaq facility of the NASD on the day prior to the Nasdaq Exchange’s first day of operation as an independent exchange. The SEC indicates that it views these rules to be consistent with the requirements of the Exchange Act because they would enable current Nasdaq securities to continue trading once the Nasdaq Exchange begins operations as a national securities exchange, thus providing a continuous market for investors for these securities.