[Federal Register Volume 65, Number 175 (Friday, September 8, 2000)]
[Notices]
[Pages 54585-54589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-23027]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43232; File No. SR-NASD-00-46]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Decimal Pricing for Listed 
Securities

August 30, 2000.
    Pursuant to the provisions of Section 19(b)(1) under the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on August 7, 2000, the National Association of 
Securities Dealers, Inc. (``NASD'' or ``Association''), through its 
wholly owned subsidiary, The Nasdaq Stock Market, Inc., (``Nasdaq'') 
filed with the Securities and Exchange Commission (``Commission'' or 
``SEC'') the proposed rule change as described in Items I, II, and III 
below, which Items have been prepared by Nasdaq. On August 24, 2000, 
Nasdaq amended the proposed rule change.\3\ Nasdaq filed the proposal 
pursuant to Section 19(b)(3)(A) of the Act,\4\ and Rule 19-4(f)(6) 
thereunder,\5\ which renders the proposal effective upon filing with 
the Commission.\6\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Thomas P. Moran, Counsel, The Nasdaq Stock 
Market, Inc. (``Nasdaq''), to Alton Harvey, Chief, Office of Market 
Watch, Division of Market Regulation (``Division''), Commission, 
dated August 24, 2000 (``Amendment No. 1''). In Amendment No. 1, 
Nasdaq replaced the proposed rule text that was originally filed in 
its entirety.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ The Commission agreed to waive the 5-day pre-filing notice 
requirement because the proposal implements decimal pricing pursuant 
to the ``Decimals Implementation Plan for the Equities and Options 
Markets'' (``Plan'') submitted to the Commission on July 24, 2000.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    On June 8, 2000, the Commission ordered the national securities 
exchanges and the NASD (``Participants'') to submit a phase-in plan to 
the Commission July 24, 2000 providing for decimal pricing in exchange-
listed securities and options by September 5, 2000, and for phasing in 
of decimal pricing for at least some Nasdaq securities by march 12, 
2001, with decimalization extended to all exchange-listed securities, 
options and Nasdaq securities by April 9, 2001.\7\ The June 8th Order 
also requires the exchanges and NASD file by August 7, 2000 rule 
changes necessary to implement the Plan.
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    \7\ Securities Exchange Act Release No. 42914 (June 8, 2000), 65 
FR 38010 (June 19, 2000) (``June 8th Order'').
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    The Participants have developed recommendations for a Phase-In 
Period for conversion to decimal pricing. These recommendations are 
contained in the Plan, which was submitted to the Commission on July 
24, 2000. This Phase-In Period, which will consist of four Phases, will 
begin on August 28, 2000, and will end with full implementation of 
decimal pricing for all equities and options on or before April 9, 
2001.
    Nasdaq proposes to modify various NASD rules to support the 
commencement of the limited decimal pilot for Exchange-listed issues 
scheduled to start on August 28, 2000, as provided for in the Plan. 
Nasdaq also proposes to amend the appropriate rules to conform to 
proposed changes to the Intermarket Trading System (``ITS'') Plan. 
Nasdaq has designated this proposal as non-controversial, and requests 
that the Commission waive the 30-day pre-operative waiting period 
contained in Rule 19b-4(f)(6)(iii) under the Act.\8\ Below is the text 
of the proposed rule change. Proposed new language is italicized; 
proposed deletions are in [brackets].
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    \8\ 17 CFR 240.19-b4(f)(6)(iii).
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* * * * *

IM-2230. ``Third Market'' Confirmations

    Members who act as brokers for customers in transactions in 
listed securities in the ``third market,'' and members who make 
markets in such securities, have sought clarification and uniformity 
regarding the disclosures to be made to customers in situations in 
which the third market firms had confirmed to the retailing member 
plus or minus a differential, e.g., ``20 plus \1/8\'' or ``20 minus 
\1/8\ for securities trading in fractions, or ``$20 plus $.10 or $20 
minus $.10 for securities trading in decimals.'' In some such cases 
the confirmation from the retailing member to the customer has 
indicated that the transaction was effected for the customer at a 
price of 20 and that the total commission paid by the customer was 
received by the retailing member, and it failed to disclose that the 
retailing member, in effect, absorbed the \1/8\ or $.10 differential 
charged by the third market firm.
    In cases such as those described above, where the retailing 
member effects an agency transaction for his customer with a third 
market firm at a price which is in line with the then current price 
on the exchange plus or minus a differential, with the retailer 
absorbing the differential charged by the third market firm, the 
following legend should be used by the retailing member to insure 
adequate disclosure on the confirmation to the customer:
    We executed this transaction for you with a dealer who confirmed 
to us at the above price, plus (in the event you purchased) or less 
(in the event you sold) [a fraction of * * *] * * * cents per share. 
This [fraction] amount was absorbed by us out of the amount shown as 
our commission. Full details of this transaction are available upon 
request. *The fractional amount absorbed may be shown, for example, 
as \1/8\ or written one-eighth.
    Failure to send an appropriate confirmation which conforms to 
the provisions hereof may involve not only conduct inconsistent with 
high standards of commercial honor and just and equitable principles 
of trade, but also violations of rules of the Commission, 
particularly the confirmation rule, SEC Rule 10b-10.
* * * * *

3220. Adjustment of Open Orders

    (a) No change.
    (1) In the case of a cash dividend or distribution, the price of 
the order shall be reduced by subtracting the dollar amount of the 
dividend or distribution from the price of the order and rounding 
the result to the next lower minimum quotation variation used in the 
primary market, provided that if there is more than one minimum 
quotation variation in the primary market, then the greater of the 
variations shall be used (e.g., if a market has minimum quotation 
variations of \1/16\ or \1/32\ of a dollar for securities trading in 
fractions, depending on the price of the security, or $.01 for 
securities trading in decimals, then the adjustment to open orders 
shall be in increments of \1/16\ of a dollar for issues trading in 
fractions, and $.01 for issues trading in decimals);
    (2)-(3) No change.
    (b)-(e) No change.

3370. Prompt Receipt and Delivery of Securities

    (a) No change.
    (b) (1)-(4) No change.
    (5) ``Bona Fide Fully Hedged'' and ``Bona Fide Fully 
Arbitraged''
    In determining the availability of the exemption provided in 
paragraph (b)(2)(B) above and in Rule 11830 from short sale 
requirements for ``bona fide fully hedged'' and ``bona fide fully 
arbitraged'' transactions, the following guidelines shall apply. 
These guidelines are for illustrative purposes and are not intended 
to limit the Association's ability to determine the proper scope of 
the terms ``bona fide fully hedged'' or ``bona fide fully 
arbitraged'' pursuant to this provision, on a case-by-case basis.

[[Page 54586]]

(A) Bona Fide Fully Hedged

    The following transactions shall be considered bona fide fully 
hedged:
    (i) Short a security and long a convertible debenture, preferred 
or other security which has a conversion price at or in the money 
and is convertible within ninety days into the short security.
    Example: Long ABCD Company 9% convertible subordinated 
debentures due [1998] 2003. Each debenture is convertible into 
common at $27.90 per share of common equal to 35.842 shares of 
common per 1M debenture.
     With the price of the ABCD at 8\3/4\-9 or 8.75-9 and a 
short position of 100 shares of ABCD the short position would not be 
exempt.
     If the price of ABCD was $28 with a short position of 
100 shares, 35 shares would be exempt and the remaining 65 shares 
would not be exempt.
    (ii) Short a security and long a call which has a strike price 
at or in the money and which is exercisable within 90 calendar days 
into the underlying short security.
    Example: Long 1 call of EFGH at a price of either [(]44 \1/8\[)] 
or $44.10 with a strike price of 40 expiring within 90 calendar 
days.
     With the circumstances as above 100 shares would be 
exempt.
     If the strike price was 50 a short position of 100 
shares would not be exempt.
     With any strike price and the call expiring in more 
than 90 days any short of the common would not be exempt.
    (iii) Short a security and long a position in warrants or rights 
which are exercisable within 90 days into the short security. To the 
extent that the long warrants or rights are ``out of the money,'' 
then the short position shall be exempt up to the market value of 
the long warrants or rights.
    Example: Long 100 warrants of IJKL (IJKLW: 2\1/4\-2\3/4\ or 
2.25-2.75). Each warrant is exercisable into 1 share of common at 
$2. (IJKL: 4-4\1/2\ or $4-4.50).
     With the circumstances as above a short position of 100 
shares would be exempt.
     If the price of IJKL is $1.50 and the market value of 
long warrants is \1/4\ of a point, or $.25, a short position of 16 
shares would be exempt.

(B) Bona Fide Fully Arbitraged

    The following transactions shall be considered bona fide fully 
arbitraged:
    (i) No change.
    (ii) Long a security which is without restriction other than the 
payment of money exchangeable or convertible within 90 calendar days 
of the purchase into a second security together with a short 
position from an off-setting sale of the second security at or about 
the same time for the purpose of taking advantage of a concurrent 
disparity in the prices of the securities.
    Example: Long 100 shares of MNOP (MNOP: 51-51\1/4\ or 51.00-
51.25) which is being acquired by QRST Corp. (QRST: 52\1/8\-52\3/8\ 
or 52.10-52.30) at the rate of 1.15 shares per MNOP share.
     If the exchange is to take place within 90 days then a 
short of 115 shares of QRST would be exempt from the mandatory buy-
in. Also, if the exchange was to take place at a date later than 90, 
all short positions in the above example would be subject to the 
mandatory buy-in.
    (c) No change.
* * * * *

Intermarket Trading System/Computer Assisted Execution System

    Rules 5210. through 5230. No Change.
    Rule 5240. Pre-Opening Application--Opening by ITS/CAES Market 
Maker the pre-opening application enables an ITS/CAES Market Maker 
or ITS Participant Exchange in any participant market who wishes to 
open his market in an ITS Security to obtain through the ITS System 
or CAES, any pre-opening interest of an ITS Participant Exchange or 
other ITS/CAES Market Makers registered in that security and/or 
market makers in other participant markets.
    (a) Notification Requirement--Applicable Price Change, Initial 
Notification
    (1) Whenever an ITS/CAES Market Maker, in an opening transaction 
in any ITS/CAES Security, anticipates that the opening transaction 
will be at a price that represents a change from the security's 
previous day's consolidated closing price of more than the 
``applicable price change'' (as defined below), he shall notify the 
other Participant markets of the situation by sending a ``pre-
opening notification'' through the System. Thereafter, the ITS/CAES 
Market Maker shall not open the security in his market until not 
less than three minutes after his transmission of the pre-opening 
notification. The ``applicable price changes'' are:

------------------------------------------------------------------------
                                   Consolidated       Applicable price
           Security               closing price     Change  (more than)
------------------------------------------------------------------------
Network A.....................  Under $15........  \1/8\ point.
                                $15 or over [*]..   \1/4\ point.\1\
Network B.....................  Under $5.........  \1/8\ point.
                                $5 or over.......   \1/4\ point.\2\
------------------------------------------------------------------------

    For transactions involving securities trading in decimal-based 
increments, the ``applicable price changes'' are:

------------------------------------------------------------------------
                                                        Applicable price
            Security                  Consolidated       Change  (more
                                     closing price           than)
------------------------------------------------------------------------
Network A.......................  Under $15..........              $0.10
                                  $15 or over........           \1\ 0.25
Network B.......................  Under $5...........               0.10
                                  $5 or over.........           \2\ .25
------------------------------------------------------------------------
\1\ If the previous day's consolidated closing price of a Network A
  Eligible Security exceeded $100 dollars and the security does not
  underlie an individual stock option contract listed and currently
  trading on a national securities exchange the ``applicable price
  change'' is one [point] dollar.
\2\ If the previous day's consolidated closing price of a Network B
  Eligible Security exceeded $75 and the security is not a Portfolio
  Deposit Receipt, Index Funds Share, or Trust Issued Receipt, or does
  not underlie an individual stock option contract listed and currently
  trading on a national securities exchange the ``applicable price
  change'' is one dollar.

    (2) A pre-opening notification shall:
    (A) be designated as a pre-opening notification (POA);
    (B) identify the ITS/CAES Market Maker and the security 
involved; and
    (C) indicate the ``applicable price range'' by being formatted 
as a standardized pre-opening administrative message as follows: POA 
MMID/XYZ (RANGE)
    (3) The price range shall not exceed the ``applicable price 
range'' shown below:

------------------------------------------------------------------------
                                   Consolidated
           Security               closing price         Price range
------------------------------------------------------------------------
Network A.....................  Under $50........  \1/2\ point.
                                $50 or over [**].  1 point. \3\
Network B.....................  Under $10........  \1/2\ point.

[[Page 54587]]

 
                                $10 or over......  1 point. \4\
------------------------------------------------------------------------

    For transactions involving securities trading in decimal-based 
increments, the price range shall not exceed the ``applicable price 
range'' shown below:

------------------------------------------------------------------------
                                      Consolidated
            Security                 closing price        Price range
------------------------------------------------------------------------
Network A.......................  Under $50..........              $0.50
                                  $50 or over........           \3\ 1.00
Network B.......................  Under $10..........               0.50
                                  $10 or over........           \4\ 1.00
------------------------------------------------------------------------
\3\ If the previous day's consolidated closing price of an ITS security
  exceeded $100 dollars and the Security does not underlie an individual
  stock option contract listed and currently trading on a national
  securities exchange the ``applicable price change'' is two [points]
  dollars.
\4\ If the previous day's consolidated closing price of a Network B
  Eligible Security exceeded $75 and the security is not a Portfolio
  Deposit Receipt, Index Funds Share, or Trust Issued Receipt, or does
  not underlie an individual stock option contract listed and currently
  trading on a national securities exchange the ``applicable price
  change'' is two dollars.

    The price range also shall not straddle the previous day's 
consolidated closing price, although it may include it as an 
endpoint (e.g., a \1/8\-\5/8\ price range would be permissible if 
the previous day's consolidated closing price were \1/8\ or \5/8\, 
but not if the closing price were \1/4\ or \3/8\ or \1/2\).
    For transactions involving securities trading in decimal-based 
increments, the price range also shall not straddle the previous 
day's consolidated closing price, although it may include it as an 
endpoint (e.g., a 40.15-40.65 price range would be permissible if 
the previous day's consolidated closing price were 40.15-40.65, but 
not if the closing price were within the price range of 
40.16-40.64).
    (b) Subsequent Notifications, (b)(1) through (b)(2)(ii) No 
Change.
    (B) Notwithstanding the preceding sentence, in situations where 
the price range is an initial or additional notification includes 
price variations equal to or less than the applicable price change 
parameters, the ``cancellation'' notification signifies that the 
anticipated opening price (i) may or may not be outside of the price 
range specified in the pre-opening notification and (ii) does not 
represent a change from the previous day's consolidated closing 
price of more than the applicable price change.

    Example: CTA close at 30. Pre-Opening Notification sent with any 
one of the following price ranges: 30-30\1/2\; 30\1/8\-30\5/8\; or 
30\1/4\-30\3/4\. It is then determined that the stock will open at 
29\3/4\ or 29\7/8\. Under paragraph (b)(2)(A), the specialist 
``shall'' send cancellation notification. If it is subsequently 
determined that stock will open at 30, 30\1/8\, or 30\1/4\, the 
specialist need not reindicate stock pursuant to paragraph 
(b)(2)(B).

    Example for Decimal-Based Securities: CTA close at 30. Pre-
Opening Notification sent with a price range at or within the 
following range: 30.10-30.60. It is then determined that the stock 
will open at a price within the range of 29.75 to 29.99. Under 
paragraph (b)(2)(A), the specialist ``shall'' send cancellation 
notification. If it is subsequently determined that stock will open 
at a price within the range of 30.-30.25, the specialist need not 
reindicate stock pursuant to paragraph (b)(2)(B).
    (3) Participation as Principal Precluded (``Second Look'').
    If a responding market maker who has shown in his pre-opening 
response interest as a principal at a price better than the 
anticipated opening price would be precluded from participation as a 
principal in the opening transaction (e.g. his responding principal 
interest is to sell at price \1/8\ or more below the opening price 
established by paired agency orders), the ITS/CAES Market Makers 
shall send a ``second look'' notification through the System, 
notifying such responding market maker of the price and size at 
which he could participate as principal (i.e., the parenthetical 
example above, the total amount of the security that he would have 
to sell at the \1/8\ better price to permit the opening transaction 
to occur at that price).
    For securities trading in decimal-based increments, if a 
responding market maker who has shown in his pre-opening response 
interest as a principal at a price better than the anticipated 
opening price would be precluded from participation as principal in 
the opening transaction (e.g. his responding principal interest is 
to sell at a price .01 or more below the opening price established 
by paired agency orders), the ITS/CAES Market Makers shall send a 
``second look'' notification through the System, notifying such 
responding market maker of the price and size at which he could 
participate as principal (i.e., the parenthetical example above, the 
total amount of the security that he would have to sell at the .01 
better price to permit the opening transaction to occur at that 
price).
    (c)-(i) No Change.

5250. Pre-Opening Application--Openings on Other Participant Markets 
(a) Pre-Opening Responses:

     Whenever an ITS/CAES Market Maker who has received a pre-
opening notification from another ITS/CAES Market Maker or ITS 
Participant Exchange as provided in the ITS Plan in any ITS Security 
as to which he is registered as an ITS/CAES Market Maker wishes to 
participate in the opening of that security in the Participant 
market from which the pre-opening notification was issued, he may do 
so by sending obligations to trade-through the System to such 
Participant market in a pre-opening response. A pre-opening response 
shall be designated as a pre-opening response (POR), identify the 
security, and show the ITS/CAES Market Maker's buy and/or sell, 
interest (if any), both as principal for his own account (``P'') and 
as agent for orders left with him (``A''), at each price level 
within the price-range indicate in the pre-opening notification 
(e.g., 40\3/8\), reflected on a netted share basis.
    For securities trading in decimal-based increments, whenever an 
ITS/CAES Market Maker who has received a pre-opening notification 
from another ITS/CAES Market Maker or ITS Participant Exchange as 
provided in the ITS Plan in any ITS Security as to which he is 
registered as an ITS/CAES Market Maker wishes to participate in the 
opening of that security in the Participant market from which the 
pre-opening notification was issued, he may do so by sending 
obligations to trade-through the System to such Participant market 
in the pre-opening response. A pre-opening response shall be 
designated as a pre-opening response (POR), identify the security, 
and shown the ITS/CAES Market Maker's buy and/or sell, interest (if 
any), both as principal for his own account (``P'') and as agent for 
orders left with him (``A''), at each price level within the price-
range indicated in the pre-opening notification (e.g., 40.40), 
reflected on a netted share basis.
    The pre-opening response shall be formatted as follows: POR 
(MMID) BUY (SELL) A-P 40.\3/8\
    For securities trading in decimal-based increments the pre-
opening response shall be POR (MMID) BUY (SELL) A-P 40.40
    The response may also show market orders separately.
    (b)-(f) No Change.
    Rules 5260. through 5265. No Change.
* * * * *

6300. Consolidated Quotation Service (CQS)

    6310. No Change.
    6320. No Change.

6330. Obligations of CQS Market Makers

    (a) No Change.
    (b)-(d) No Change.
    (e) Minimum Price Variation for Decimal-based Quotations
    (1) The minimum quotation increment for securities authorized 
for decimal pricing as part of the SEC-approved Decimals

[[Page 54588]]

Implementation Plan for the Equities and Options Markets shall be 
$0.01.
    6340. through 6370. No Change.
* * * * *

6400. Reporting Transactions in Listed Securities

6410. Definitions

    (a)-(h) No Change.

6420. Transaction Reporting

    (a)-(c) No Change.
    (d) Procedures for Reporting Price and Volume
    Members which are required to report pursuant to paragraph (b) 
above shall transmit last sale reports for all purchases and sales 
in eligible securities in the following manner:
    (1) For agency transactions, report the number of shares and the 
price excluding the commission charged.

    Example: SELL as agent 100 shares at 40 less a commission of 
$12.50;
    REPORT 100 shares at 40.
    (2) For dual agency transactions, report the number of shares 
only once, and report the price excluding the commission charged.
    Example: SELL as agent 100 shares at 40 less a commission of 
$12.50;
    BUY as agent 100 shares at 40 plus a commission of $12.50;
    REPORT 100 shares at 40.
    (3)(A) For principal transactions, except as provided below, 
report each purchase and sale transaction separately and report the 
number of shares and the price. For principal transactions which are 
executed at a price which includes a mark-up, mark-down or service 
charge, the price reported shall exclude the mark-up, mark-down or 
service charge.
    Example: BUY as principal 100 shares from another member at 40 
(no mark-down included).
    REPORT 100 shares at 40.
    Example: BUY as principal 100 shares from a customer at 39\3/4\, 
which includes a \1/8\ mark-down from prevailing market of 39\7/8\;
    REPORT 100 shares at 39\7/8\.
    Example: BUY as principal 100 shares from a customer at 39.75, 
which includes a $0.10 mark-down from prevailing market of $39.85;
    REPORT 100 shares at 39.85.
    Example: SELL as principal 100 shares to a customer at 40\1/8\, 
which includes a \1/8\ mark-up from the prevailing market of 40;
    REPORT 100 shares at 40.
    Example: SELL as principal 100 shares to a customer at 40.10, 
which includes a .10 mark-up from the prevailing market of 40;
    REPORT 100 shares at 40.
    (B) Exception: A ``riskless'' principal transaction in which a 
member that is not a market maker in the security after having 
received from a customer an order to buy, purchases the security as 
principal from another member or customer to satisfy the order to 
buy or, after having received from a customer an order to sell, 
sells the security as principal to another member or customer to 
satisfy the order to sell, shall be reported as one transaction in 
the same manner as an agency transaction, excluding the mark-up or 
mark-down. A riskless principal transaction in which a member 
purchases or sells the security on an exchange to satisfy a 
customer's order will be reported by the exchange and the member 
shall not report.
    Example: BUY as principal 100 shares from another member at 40 
to fill an existing order;
    SELL as principal 100 shares to a customer at 40 plus mark-up of 
$12.50;
    REPORT 100 shares at 40.
    Example: BUY as principal 100 shares on an exchange at 40 to 
fill an existing order;
    SELL as principal 100 shares to a customer at 40 plus a mark-up 
of $12.50.
    DO NOT REPORT (will be reported by exchange).
    (e) No Change.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the purposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq proposes to modify various NASD Rules to support the 
commencement of the limited decimal pilot for Exchange-listed issues 
scheduled to start on August 28, 2000, pursuant to the Plan. The 
Minimum Price Variation (``MPV'') for Exchange-listed securities 
trading pursuant to the pilot program under the Plan would be $.01. 
Nasdaq also proposes amendments to various NASD rules to implement the 
pilot program in Exchange-listed securities under the Plan. Further, 
Nasdaq proposes to amend the appropriate rules to conform to proposed 
changes to the ITS Plan.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act \9\ in that the proposal 
is designed to promote just and equitable principles of trade and to 
remove impediments to and perfect the mechanism of a national market 
system, and in general, to protect investors and the public interest.
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    \9\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement Burden on Competition

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from August 7, 2000, the date that the 
proposal was filed, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ At any 
time within 60 days of the filing of the proposed rule change, the 
Commission may summarily abrogate such rule change if it appears to the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in the 
furtherance of the purposes of the Act.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(F)(6).
    \12\ The Commission considers the abrogation period to begin on 
the date the last substantive amendment is filed with the 
Commission. In this case, Nasdaq filed Amendment No. 1 on August 24, 
2000.
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    Nasdaq has requested that the Commission accelerate the operative 
date. The Commission believes that it is consistent with the protection 
of investors and the public interest and therefore finds good cause to 
designate the proposal, as amended, to become immediately operative 
upon filing. Acceleration of the operative date will permit Nasdaq to 
implement the pilot program of decimal quoting in Exchange-listed 
securities under the Plan starting on August 28, 2000.\13\
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    \13\ The Plan provides for MPVs for equities and options of no 
less than one cent. The June 8th Order requires the Participants to 
submit joint or individual studies two months after Full 
Implementation (as defined in the Plan) regarding the impact of 
decimal pricing on systems capacity, liquidity, and trading 
behavior, including an analysis of whether there should be a uniform 
minimum quoting increment. If a Participant wishes to move to 
quoting in an increment of less than one cent, the Participant 
should include in its study a full analysis of the potential impact 
of such trading on the Participant's market and the markets as a 
whole. Within thirty days after submitting the study, and absent 
Commission action, the Participants individually must submit for 
notice, comment, and Commission action, proposed rule changes under 
Section 19(b) of the Act to establish their individual choice of 
minimum increments by which equities or options are quoted on their 
respective markets.

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[[Page 54589]]

    The Commission also believes that the proposed amendments are non-
controversial as they provide housekeeping changes with respect to 
rules that express price values in fractions being changed to decimals. 
Nasdaq has also requested that the Commission waive the 5-day pre-
filing requirement. The Commission also finds good cause to waive the 
5-day pre-filing requirement since the proposed rule amendments are in 
accordance with the Plan. For these reasons, the Commission designates 
that the proposal, as amended, become operative immediately upon filing 
with the Commission.\14\
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    \14\ For purposes only of accelerating the operative date of 
this proposal, as amended, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to File No. SR-NASD-00-46 and should 
be submitted by September 29, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-23027 Filed 9-7-00; 8:45 am]
BILLING CODE 8010-01-M