[Federal Register Volume 65, Number 222 (Thursday, November 16, 2000)]
[Notices]
[Pages 69357-69358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29287]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43533; File No. SR-NASD-00-63]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Amending NASD Rule 4611 Relating to 
Registration As a Nasdaq Market Maker in a Security

November 8, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 20, 2000, the National Association of Securities Dealers, 
Inc. (``NASD''), through its wholly-owned subsidiary The Nasdaq Stock 
Market, Inc., (``Nasdaq'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by Nasdaq. Nasdaq filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which 
renders the proposal effective upon filing with the Commission. 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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Nasdaq is proposing to amend NASD Rule 4611 to allow an application 
for registration as a market maker in a security to become effective on 
the same day the application is filed. Nasdaq is also proposing a 
corresponding technical change to Rule 4720 regarding SOES 
Participation Registration. Below is the text of the proposed rule 
change; proposed deletions are in brackets and proposed additions are 
underlined.
    4611. Registration as a Nasdaq Market Maker
* * * * *
    [(c) A Nasdaq market maker may become registered in a newly 
authorized issued by contacting Nasdaq Market Operations. If 
registration is requested within five (5) business days after the issue 
is authorized, registration shall become effective at the time the 
registration request is entered.]
    [(d)] (c) A Nasdaq market maker may become registered in an issue 
[already included in Nasdaq] by entering a registration request via a 
Nasdaq terminal or other Nasdaq approved electronic interface with 
Nasdaq's system or by contacting Nasdaq Market Operations. If 
[registration is requested in an issue that has been included in Nasdaq 
for more than five (5) days, and] the requirements of paragraph (b) 
above are satisfied, registration shall become effective on the day 
[after] the registration request is entered. [Provided, however, that 
same day registration is permissible for:
    (1) a Nasdaq market maker, registered in a security that is the 
subject of a publicly announced merger or acquisition offer with 
another Nasdaq issue, who seeks registration in the other merger or 
acquisition issue; and
    (2) a manager or co-manger of an underwriting syndicate for a 
secondary offering of a security on the day of the secondary offering 
of that security.]
    [(e)] (d) A Nasdaq market maker's registration in an issue shall be 
terminated by the Association if the market maker fails to enter 
quotations in the issue within five (5) business days after the market 
maker's registration in the issue becomes effective.
    [(f)](e) Unless otherwise specified by the Association, each Nasdaq 
market maker that is registered as a market maker in a Nasdaq National 
Market security shall also at all times be registered as a market maker 
in the Small Order Execution System (SOES) with respect to that 
security and be subject to the SOES Rules as set forth in the Rule 4700 
Series.
    [(g)](f) In cases where a market making member has more than one 
trading location, a fifth character geographic indicator shall be 
appended to the market marker's identifier for that security to 
identify the branch location where the security is traded. The fifth-
character branch indicators are established by the Association and 
published from time to time in the Nasdaq/CQS symbol directory.
    4720. SOES Participant Registration
* * * * *
    (b) Pursuant to Rule 4611[(f)], participation as a SOES Market 
Maker is required for any Nasdaq market maker registered to make a 
market in an NNM security.

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 proposed

[[Page 69358]]

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

    Presently, NASD Rule 4611 states that a request to become 
registered as a market maker in a security that has been trading on 
Nasdaq for more than five (5) days is effective on the day following 
the request. If a security has been trading on Nasdaq for five days or 
less, the market maker's request becomes effective immediately. In 
contrast, market makers utilizing Electronic Communication Networks/
Alternative Trading Systems (``ECNs/ATSs'') may immediately upon 
request begin displaying quotes/orders for any security trading on 
Nasdaq, regardless of how long the security has been trading. To 
eliminate the disparate treatment of market makers, Nasdaq is proposing 
to allow market makers to begin trading in an issue on the same day 
they apply for registration.
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act \5\ in that it is 
designed 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. In addition, the proposal is not designed to permit 
unfair discrimination between brokers and dealers, but instead is 
designed to eliminate the disparate treatment of market makers.
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    \5\ 15 U.S.C. 780-3(b)(6).
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    Nasdaq also believes the proposed rule change is consistent with 
Section 11A of the Act.\6\ Section 11A set forth Congress's findings 
that it is in the public interest and appropriate for the protection of 
investors and the maintenance of fair and orderly markets to assure, 
among other things, fair competition among brokers and dealers. The 
proposal is consistent with this goal because it will allow market 
makers to begin quoting in a security in the same timeframe as that 
which is applicable to ECNs/ATSs.
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    \6\ 15 U.S.C. 78k-1.
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(B) Self-Regulatory Organization's Statement on 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, as amended.

(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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A) of the Act, \7\ and Rule 19b-4(f)(6) \8\ 
thereunder because the proposed rule change does not significantly 
affect the protection of investors or the public interest; does not 
impose any significant burden on competition; and does not become 
operative for 30 days from the date on which the proposed rule change 
was filed, or such shorter time as the Commission may designate. The 
proposal is designed to eliminate the disparate treatment of market 
makers in that the proposal is designed to eliminate the disparate 
treatment of market makers and will permit both market makers and those 
utilizing ECNs/ATSs to begin trading in an issue on the same day they 
apply for registration.
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    \7\ 5 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 204.19b-4(f)(6).
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    In addition, Nasdaq provided the Commission with written notice of 
its intent to file this proposed rule change, and the written notice 
included a description of the proposal and the text of the proposed 
rule change. Nasdaq also requested that the Commission accelerate the 
operative date. \9\ The Commission believes that the proposal is 
consistent with the protection of investors and the public interest and 
finds good cause to designate the proposal immediately operative upon 
filing. At any time within 60 days of the filing of a rule change 
pursuant to Section 19(b)(3)(A) of the Act, \10\ the Commission may 
summarily abrogate the 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 furtherance of the purposes of 
the Act.
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    \9\ For purposes only of accelerating the operative date of this 
proposal, the Commission has considered its impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78s(b)(3)(A).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
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 the file number in the caption 
above and should be submitted by December 7, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-29287 Filed 11-15-00; 8:45 am]
BILLING CODE 8010-01-M