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Federal Register / Vol. 86, No. 19 / Monday, February 1, 2021 / Notices
In contrast to its observations regarding operating companies,12 the Exchange states that typically the only investors holding shares in a SPAC prior to an IPO are its founders and that all other round lot holders generally represent new investors in the SPACs IPO.13 The Exchange therefore does not believe that SPACs present a similar risk as operating companies of circumventing the round lot holder requirement through share transfers for no value and represents that it has not observed this problem with SPACs.14 Further, the Exchange states that shareholders of SPACs are afforded the opportunity to redeem or tender their shares for a pro rata portion of the value of the IPO
proceeds maintained in a trust account in connection with the SPACs business combination, which must occur within 36 months of the IPO, and therefore, the SPAC structure provides an alternative liquidity mechanism that operating companies do not offer.15
The Exchange accordingly believes that SPACs should be excluded from the Required Minimum Amount and proposes to revise Nasdaq Rules 5315f1C for the Nasdaq Global Select Market, 5405a3 for the Nasdaq Global Market, and 5505a3
for the Nasdaq Capital Market to exclude SPACs from the requirement to meet the Required Minimum Amount at the time of initial listing.16 The Exchange notes, however, that SPACs must continue to satisfy the Exchanges other initial listing requirements at the time of listing,17 including the SPAC
has the right to redeem their shares into a pro rata share of the aggregate amount in the deposit account if: i The shareholder votes against a business combination; or ii a shareholder vote on the business combination is not held for which the company must file and furnish a proxy or information statement subject to Regulation 14A or 14C under the Act. See Nasdaq Rules IM51012d and e.
12 See supra notes 89 and accompanying text.
13 See Notice, supra note 3, at 68401.
14 See id.
15 See id. at 6840102. The Exchange also states that it believes the value of a SPAC prior to a business combination, unlike the value of an operating company, is not based solely on investor demand for the security but, in the Exchanges view, is based primarily on the value of the cash held in the trust account. See id.
16 See id. at 68402.
17 See id. These initial listing requirements currently include, among other things, a minimum number of unrestricted publicly held shares, minimum market value of unrestricted publicly held shares, minimum number of round lot holders of unrestricted shares, and minimum bid price. See id. at 68402 n.9. The Commission notes, as an example, that a SPAC listed on the Nasdaq Capital Market under the Market Value of Listed Securities Standard must have at least one million unrestricted publicly held shares and a market value of unrestricted publicly held shares of at least $15 million. See Nasdaq Rules 5505a2 and 5505b2C. See also Nasdaq Rule 5300 Series
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listing rules, which, among other things, provide shareholders the right to redeem or convert their shares for a pro rata share of the trust account in conjunction with the business combination.18 Moreover, following a business combination, in order to remain listed, the combined company must meet Nasdaqs initial listing requirements, which include the Required Minimum Amount, at the time of the IPO.19 The Exchange states in its proposal that it believes that, although SPACs will be excluded from the Required Minimum Amount at the time of initial listing, requiring SPACs to satisfy Nasdaqs other initial listing standards 20 would continue to help ensure that SPACs have sufficient public float, investor base, and trading interest likely to generate depth and liquidity to support exchange listing and trading, which should help to protect investors and the public interest.21
III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.22 In particular, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6b5
of the Act,23 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, 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, and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
The Commission has consistently recognized that the development and enforcement of meaningful listing standards for an exchange is of critical importance to financial markets and the The Nasdaq Global Select Market and 5400 Series The Nasdaq Global Market.
18 See Notice, supra note 3, at 6840203. See also supra notes 11, 15, and accompanying text.
19 See Notice, supra note 3, at 68402.
20 See supra note 17.
21 See Notice, supra note 3, at 68402.
22 15 U.S.C. 78fb. In approving this proposed rule change, as modified by Amendment No. 1, the Commission has considered the proposed rule changes impact on efficiency, competition, and capital formation. See 15 U.S.C. 78cf.
23 15 U.S.C. 78fb5.

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investing public.24 Among other things, the Commission has stated that listing standards provide the means for an exchange to screen issuers that seek to become listed, and to provide listed status only to those that are bona fide companies that have or will have sufficient public float, investor base, and trading interest likely to generate depth and liquidity sufficient to promote fair and orderly markets.25
Meaningful listing standards are also important given investor expectations regarding the nature of securities that have achieved an exchange listing, and the role of an exchange in overseeing its market and assuring compliance with its listing standards.26
The Exchange has proposed to exclude SPACs, prior to the completion of a business combination, from the requirement to meet the Required Minimum Amount at the time of initial listing on the Nasdaq Global Select Market, Nasdaq Global Market, and Nasdaq Capital Market. As described above, the Exchange states that, unlike with operating companies where the 24 See
infra notes 2526.
e.g., Securities Exchange Act Release Nos.
81856 October 11, 2017, 82 FR 48296, 48298
October 17, 2017 SRNYSE201731 Approval Order; 81079 July 5, 2017, 82 FR 32022, 32023
July 11, 2017 SRNYSE201711 Approval Order; 65708 November 8, 2011, 76 FR 70799, 70802 November 15, 2011 SRNASDAQ2011
073 Approval Order; 63607 December 23, 2010, 75 FR 82420, 82422 December 30, 2010 SR
NASDAQ2010137 Approval Order; 57785 May 6, 2008, 73 FR 27597, 27599 May 13, 2008 SR
NYSE200817 Approval Order; and 58228 July 25, 2008, 73 FR 44794, 44796 July 31, 2008 SR
NASDAQ2008013 Approval Order. In addition, once a security has been approved for initial listing, maintenance criteria allow an exchange to monitor the status and trading characteristics of that issue to ensure that it continues to meet the exchanges standards for market depth and liquidity so that fair and orderly markets can be maintained. See, e.g., Securities Exchange Act Release No. 82627
February 2, 2018, 83 FR 5650, 5653 n.53 February 8, 2018 SRNYSE201730 Approval Order;
SRNYSE201731 Approval Order, 82 FR at 48298; SRNYSE201711 Approval Order, 82 FR
at 32023; SRNASDAQ2010137 Approval Order, 75 FR at 82422; and SRNYSE200817 Approval Order, 73 FR at 27599. The Commission has stated that adequate listing standards, by promoting fair and orderly markets, are consistent with Section 6b5 of the Act, in that they are, among other things, designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, and protect investors and the public interest. See, e.g., SRNYSE2017
30 Approval Order, 83 FR at 5653 n.53; Securities Exchange Act Release Nos. 87648 December 3, 2019, 84 FR 67308, 67314 n.42 December 9, 2019
SRNASDAQ2019059; and 88716 April 21, 2020, 85 FR 23393, 23395 n.22 April 27, 2020
SRNASDAQ2020001.
26 See, e.g., SRNASDAQ2011073 Approval Order, supra note 25, 76 FR at 70802; SR
NASDAQ2010137 Approval Order, supra note 25, 75 FR at 82422; SRNYSE200817 Approval Order, supra note 25, 73 FR at 27599; and SR
NASDAQ2008013 Approval Order, supra note 25, 73 FR at 44796.
25 See,
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