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Release: Media Contact: |
May
13, 2003 |
NASDAQ Files
Petition Requesting the SEC
to Repeal NYSE Rule 500 In Its Entirety
New York, NY —
The Nasdaq Stock Market, Inc. today filed a petition for rulemaking
to repeal Rule 500 of the New York Stock Exchange (NYSE). The rule restricts
the ability of companies that list their stock on the NYSE to delist
voluntarily any class of their securities from that market.
In its present
form, the Rule requires that in order to delist its securities from the
NYSE a domestic company must:
(a) provide actual written notice to at least its 35 largest shareholders
of record and issue a press release announcing the delisting proposal;
(b) delay delisting for 20 to 60 business days from the later of the written
notice or the press release; and
(c) obtain the approval of the audit committee, in addition to the approval
of the issuer's board.
As the petition explains, NASDAQ requests the Commission to repeal the Rule for three reasons:
(1)
the Rule is a relic of another era that serves no legitimate investor
protection purpose in today's market;
(2) the Rule's shareholder notice provisions and the requirement of audit
committee approval are not consistent with the principles of shareholder
democracy and corporate governance espoused by the Commission; and
(3) the Rule is antithetical to the free and open competition that the
Commission has consistently advanced and that is the bedrock of the U.S.
capital markets system.
The Commission's mandate under Section 11A of the Securities and Exchange Act of 1934 ("Section 11A") to "assure . . . fair competition . . . among exchange markets" requires the Commission to repeal Rule 500. When the Commission approved the present version of Rule 500 in July 1999, over opposition by NASDAQ and other markets, it did agree with the protesting markets that the Rule, even as revised, impedes issuers in selecting the marketplace best suited to their needs, and questioned whether the Rule was justified by a need to protect investors.
The Commission chose to wait and see if the July 1999 revisions to Rule 500 resolved the Commission's long-standing concerns with the Rule's anti-competitive effects before taking further action. The Commission invited reconsideration of the Rule "on an ongoing basis."
As the petition notes, there is no longer a remotely tenable argument that investors need to be protected from a company's business decision to list its stock on a securities market other then the NYSE. Among the arguments cited are the following:
- the separation of the NASDAQ market from its regulator, NASD, assures the integrity of our (NASDAQ's) regulatory process;
- according to SEC-mandated data (11Ac1-5) analyzed by outside firms, when compared with traditional exchanges that direct order flow into a floor-based, specialist structure, NASDAQ's decentralized structure of multiple dealers competing for order flow gives investors faster execution speeds, superior quoted spreads, and lower transaction costs; and
- NASDAQ's listing standards are easier to understand, more protective of investors, administered more transparently and enforced more consistently than those of the NYSE.
NASDAQ (OTCBB:NDAQ) is the world's largest electronic stock market. With approximately 3,500 companies, NASDAQ lists more companies and trades more shares per day on average than any other U.S. market. It is home to category-defining companies that are leaders across all areas of business including technology, retail, communications, financial services, media and biotechnology industries. For more information about NASDAQ, visit the NASDAQ Web site at www.NASDAQ.com or the NASDAQ NewsroomSM at www.nasdaq.com/newsroom.