[Federal Register Volume 66, Number 32 (Thursday, February 15, 2001)]
[Notices]
[Pages 10541-10544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-3800]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43944; File No. SR-NASD-00-22]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Notice of Filing and Order Granting Accelerated Approval of 
Amendments No. 1 and No. 2 by the National Association of Securities 
Dealers, Inc. Relating to Limit Order Protection for OTC Bulletin Board 
Securities

February 8, 2001.

I. Introduction

    On April 19, 2000, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, the Nasdaq Stock Market, Inc. 
(``Nasdaq''), filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 \2\ 
thereunder, a proposed rule change that would, for a 12-month pilot 
period, apply limit order protection to a select subset of securities 
traded on the OTC Bulletin Board (``OTCBB'').\3\ The proposal was 
published for comment in the Federal Register on June 16, 2000.\4\ On 
December 7, 2000, Nasdaq filed Amendment No. 1 to the proposal.\5\ On 
January 24, 2001, Nasdaq filed Amendment No. 2 to the proposal.\6\ The 
Commission received twelve comments on the proposal. This notice and 
order approves the proposed rule change, solicits comment from 
interested persons on Amendment Nos. 1 and 2, and approves Amendment 
Nos. 1 and 2 on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The OTCBB is a quotation medium, owned by the NASD and 
operated by Nasdaq, for subscribing NASD members that permits 
quotations for securities that generally are not traded on a 
national securities exchange or quoted on Nasdaq.
    \4\ Securities Exchange Act Release No. 42908 (June 7, 2000), 65 
FR 37808.
    \5\ See Letter from Edward S. Knight, Executive Vice President 
and General Counsel, Nasdaq, to Nancy Sanow, Assistant Director, 
Division of Market Regulation, SEC (December 5, 2000). In Amendment 
No. 1, Nasdaq proposed additional rule text that sets forth a 
minimum increment by which an NASD member must trade ahead of a 
customer limit order to avoid violation of the proposed rule 
(``trading-ahead increment''). This minimum increment is the lesser 
of $0.05 (5 cents) per share or one-half of the current inside 
spread.
    \6\ See Letter from Jeffrey S. Davis, Assistant General Counsel, 
Nasdaq, to Nancy Sanow, Assistant Director, Division of Market 
Regulation, SEC (January 24, 2001). In Amendment No. 2, Nasdaq 
provided additional explanation of the new rule text and why the 
trading-ahead increment of the lesser of $0.05 per share or one-half 
of the current inside spread was selected.
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II. Description of the Proposal

    Nasdaq has proposed to adopt the following new rule:

6541. Limit Order Protection

    (a) Members shall be prohibited from ``trading ahead'' of customer 
limit orders that a member accepts in securities quoted on the OTCBB. 
Members handling customer limit orders, whether received from their own 
customers or from another member, are prohibited from trading at prices 
equal or superior to that of the customer limit order without executing 
the limit order. Members are under no obligation to accept limit orders 
from any customer.
    (b) Members may not avoid such obligation specified in paragraph 
(a) through the provision of price improvement, unless such price 
improvement is for a minimum of the lesser of $.05 or one-half (\1/2\) 
of the current inside spread. For purposes of this rule, the inside 
spread shall be defined as the difference between the best reasonably 
available bid and offer in the subject security.
    (c) Notwithstanding subparagraph (a) of this rule, a member may 
negotiate specific terms and conditions applicable to the acceptance of 
limit orders only with respect to such orders that are:
    (1) for customer accounts that meet the definition of an 
``institutional account'' as that term is defined in Rule 3110(c)(4); 
or
    (2) for 10,000 shares or more, and grater than $20,000 in value.
    (d) Contemporaneous trades
    A member that trades through a held limit order must execute such 
limit order contemporaneously, or as soon as practicable, but in no 
case later than five minutes after the member has traded at a price 
more favorable than the customer's price.
    (e) Application
    (1) This rule shall apply only to OTCBB securities specifically 
identified as such through the Nasdaq Workstation service.
    (2) This rule shall apply, regardless of whether the subject 
security is additionally quoted in a separate quotation medium.
    (3) This rule shall apply from 9:30 a.m. to 4 p.m. Eastern Time.
    (4) This rule shall be in effect until [12 months from date of 
Commission approval].
    NASD IM-2110-2 currently prohibits NASD member firms from trading 
ahead of customer limit orders in Nasdaq securities. The impetus for 
this rule (commonly known as the ``Manning Rule'') was a case brought 
by a customer of a member firm, William Manning, who alleged that the 
firm had accepted his limit order, failed to execute it, and violated 
its fiduciary duty to him by trading ahead of the order. In the Manning 
decision,\7\ the NASD found, and the Commission affirmed, that a member 
firm, upon acceptance of a customer's limit order, undertakes a 
fiduciary duty to its customer and cannot trade for its own account at 
prices more favorable than the customer's order. Although at one time 
the NASD took the position that its members could trade ahead of 
customer limit orders provided they disclosed such practice to the 
customer,\8\ NASD IM-2110-2 eliminated this disclosure ``safe-harbor'' 
for all securities listed on Nasdaq.
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    \7\ See In re E.F. Hutton & Co., Exchange Act Release No. 25887 
(July 6, 1988).
    \8\ See NASD Notice to Members 93-49 (noting that reliance on 
the disclosure safe harbor, as identified in the Manning decision, 
was the practice of certain NASD members prior to the adoption of 
NASD IM-2110-2; although the NASD submitted a rule filing to the 
Commission to codify the disclosure safe harbor, this filing was 
never acted upon by the Commission).
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    Nasdaq states that it is now appropriate to extend the principles 
of the Manning Rule to the OTCBB and has proposed to adopt NASD Rule 
6541 that will apply limit order protection to a select subset of OTCBB 
securities.\9\ NASD Rule 6541 will be instituted as a 12-month pilot 
program. While NASD members will be under no obligation to accept limit 
orders, those willing to do so will be prohibited from trading the 
securities covered by the pilot program at prices equal or superior to 
any customer limit orders held by the firm, regardless of whether those 
orders are from their own customers or from customers of firms who have 
routed those orders to the member for execution.\10\ NASD Rule 6541 
will apply even to those members who, in the past, have fully disclosed 
to their customers that they may trade ahead of customer limit orders.
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    \9\ Although the proposed rule will specifically apply to select 
OTCBB securities only during the pilot program, a broker-dealer's 
general duties of best execution will continue to apply to all 
customer orders in all securities.
    \10\ Order entry firms that forward customer orders to dealers 
for execution will continue to be subject to their duties of best 
execution and will owe a fiduciary duty to those orders. 
Accordingly, firms should routinely monitor the handling of their 
customer limit orders to ensure that the executing broker is 
complying with the provisions of this rule.
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    Nasdaq intends to apply the pilot program to approximately 325 
OTCBB securities.\11\ Nasdaq will select securities for the pilot that 
will afford it

[[Page 10542]]

the best opportunity to test the effects of the proposed rule on a wide 
range of OTCBB securities. One set will include the 200 most actively 
traded OTCBB securities, which will be chosen on the basis of specific 
price and volume parameters. An additional 100 securities will be 
selected as a representative cross-section of all remaining OTCBB 
securities. The implementation of the proposed rule upon these 300 
securities will be phased in over a period of several weeks, beginning 
with the top 200 actively traded securities, then proceeding to the 100 
representative cross-section securities. According to Nasdaq, this 
phase-in process is intended to protect against any unanticipated or 
deleterious effect that might occur through an immediate application to 
all securities. The remaining 25 securities will be selected on a case-
by-case basis after the initial phase-in period has been completed. 
Nasdaq anticipates that this remainder will be securities that are 
either highly liquid and widely held by retail investors or securities 
or have been delisted from Nasdaq or an exchange.
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    \11\ A security subject to NASD Rule 6541 will have the 
identifier ``##'' following its name as it appears on the Nasdaq 
Workstation II. Nasdaq utilized the same method to designate 
securities subject to the Commission's Order Handling Rules, 
Securities Exchange Act Release No. 37619A (September 6, 1996), 61 
FR 48290 (September 12, 1996), during their initial phase-in period.
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    Nasdaq advises that it will monitor the operation of this rule and 
its effect on the OTCBB market throughout the pilot period. Prior to 
the end of the pilot, Nasdaq will evaluate the impact of the proposed 
rule and report its findings to the Commission and, thereafter, 
determine the appropriate course of action.
    Nasdaq points out that there are significant differences between 
Nasdaq and the OTCBB. While both are quotation mediums, the OTCBB does 
not afford issuers a means to list their securities on the service and, 
thus, does not maintain relationships with quoted issuers or impose 
quantitative listing standards. In addition, OTCBB securities are 
quoted by market makers that enter their quotes through a closed 
computer network, which is accessed through the Nasdaq Workstation II. 
Unlike Nasdaq, the OTCBB does not have an order delivery or execution 
system. Therefore, although application of NASD Rule 6541 is intended 
to substantially mirror NASD IM-2110-2, Nasdaq has made four 
modifications to accommodate the differences between the Nasdaq and the 
OTCBB.
    First, NASD Rule 6541 contains a lower threshold for order size at 
which the prohibition on trading ahead of customer limit orders would 
not apply. NASD IM-2110-2, which sets forth a general prohibition 
against trading ahead of customer limit orders in Nasdaq securities, 
permits NASD members to negotiate exceptions to the general rule with a 
customer when the customer submits an order for a Nasdaq security of at 
least 10,000 shares that has a value greater than $100,000.\12\ Due to 
the relatively lower share prices of OTCBB securities, Nasdaq has set 
the corresponding thresholds at 10,000 shares and $20,000 for the 
securities covered by the OTCBB pilot program. Nasdaq advises that it 
will study these thresholds as part of its analysis of the pilot and 
may recommend adjustments, if necessary.
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    \12\ ``The value of a limit order is calculated by multiplying 
the price per share specified in that order by the number of shares 
specified in the order. Thus, the value of a limit order does not 
include any markup, markdown, commission, commission equivalent, 
sales credit, or other internal credit.'' Securities Exchange Act 
Release No. 35751 (May 22, 1995), 60 FR 27997, 27998 n.17 (May 26, 
1995) (order approving SR-NASD-94-62, which amended NASD IM-2110-2 
to prohibit a member firm from trading ahead of limit orders of 
other firm's customers that have been sent to that member).
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    Second, the Manning Rule for Nasdaq securities and the rule to be 
applied to the OTCBB will differ with respect to the time interval 
allowed for ``contemporaneous'' executions. Under NASD IM-2110-2, an 
NASD member is not deemed to have traded ahead of a customer limit 
order in a Nasdaq security if the member provides a ``contemporaneous'' 
execution of that order. ``Contemporaneous'' has been interpreted for 
Nasdaq securities to require an execution as quickly as possible, but, 
absent reasonable and documented justification, within one minute.\13\ 
Unlike Nasdaq, which has an automated order delivery and execution 
system, the OTCBB currently provides no means of automated 
communication. Market makers in OTCBB securities generally must contact 
each other via telephone, a time consuming process that can provide 
especially burdensome during periods of high trading volume. Therefore, 
Nasdaq has proposed that, for OTCBB securities covered by the pilot, a 
``contemporaneous'' trade must be executed as quickly as possible, but 
in no case later than five minutes after becoming marketable.\14\ 
Nasdaq advises that it will study this provision and may recommend 
modifications, as appropriate, in conjunction with the review of the 
pilot program.
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    \13\ See NASD Notice to Members 95-67 (Question and Answer No. 
5) (establishing a ``general time parameter'' of one minute); NASD 
Notice to Members 98-78 (clarifying that, outside of normal market 
conditions, an NASD member would not be presumptively deemed in 
violation of the limit order protection rule if it failed to execute 
a customer limit order within the one-minute period, provided it did 
so ``as soon as possible under the circumstances'').
    \14\ NASD Rule 6541 also provides that, if market conditions or 
other circumstances cause the member to exceed this five-minute 
requirement, the member should continue to attempt to execute the 
order as quicly as possible while sufficiently documenting the 
particular conditions or circumstances causing this delay.
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    Third, the pilot program will apply only from 9:30 a.m. to 4 
p.m.,\15\ although NASD IM-2110-2 applies from 9:30 a.m. until 6:30 
p.m.\16\ This is to accommodate the fact that, although the OTCBB 
service is available from 7:30 a.m. to 6:30 p.m., prices on the OTCBB 
are required to be firmly only during the normal market hours of 9:30 
a.m. to 4 p.m.
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    \15\ Nasdaq has stated that the hours of application would 
adjust accordingly on days in which the OTCBB's market hours are 
shortened due to holidays or other events.
    \16\ See NASD IM-2110-2(a).
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    The fourth difference between NASD Rule 6541 and NASD IM-2110-2 is 
discussed in the following section.

III. Amendment Nos. 1 and 2

    Under NASD IM-2110-2, a member firm that accepts and holds an 
unexecuted limit order from its customer (whether its own customer or a 
customer of another member) in a Nasdaq security and that continues to 
trade the subject security for its own market-making account at prices 
that would satisfy the customer's limit order, without executing that 
limit order, is deemed to have acted in a manner inconsistent with just 
and equitable principles of trade, in violation of NASD Rule 2110. 
However, the NASD issued guidance stating that an NASD member would not 
be deemed to violate NASD member would not be deemed to violate NASD 
IM-2110-2 if it executed its own trade ahead of the customer limit 
order at a price that improved on the customer's order by at least the 
lesser of \1/16\th of $1.00 per share (6.25 cents) or one-half the 
inside spread.\17\ The fourth principal difference between NASD Rule 
6541 and NASD IM-2110-2 is that, for the OTCBB pilot program, an NASD 
member will be permitted to trade ahead of a customer limit order if it 
offers price improvement of the lesser of $0.05 (5 cents) per share or 
one-half of the inside spread. This modification reflects the fact that 
OTCBB securities generally trade in decimals while Nasdaq securities 
trade in fractions (with the exception of certain securities trading in 
decimals on a pilot basis).
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    \17\ See NASD Notice to Members 97-57 (Question and Answer No. 
7). See also Securities Exchange Act Release No. 39049 (September 
10, 1997), 62 FR 48912 (September 17, 1997) (increasing minimum 
trading-ahead increment in Nasdaq securities from \1/64\th to \1/
16\th of $1.00 per share).
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    In Amendment No. 1, Nasdaq proposed additional rule text \18\ which 
set forth the trading-ahead increment discussed above. In Amendment No. 
2,

[[Page 10543]]

Nasdaq indicated that this increment is based upon, and consistent 
with, Nasdaq's guidance on members' Manning obligations when trading 
Nasdaq National Market and SmallCap securities. Nasdaq also stated that 
there is a balance to be struck, because requiring too much price 
improvement could limit price competition by raising market makers' 
trading costs too high, while requiring too little price improvement 
could potentially isolate pending limit orders without meaningfully 
benefiting the market. Nasdaq advised that its OTC Bulletin Board 
Advisory Committee considered the matter and concluded that $0.05 per 
share is a reasonable, meaningful cost to impose for stepping ahead of 
a customer limit order. Nasdaq believes that, based upon this analysis 
and its experience in applying the Manning Rule to Nasdaq securities, 
the aggregate benefit to the market of narrowing the spread by a $0.05 
appears to outweigh the costs to a single market participant of not 
receiving an execution.
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    \18\ See NASD Rule 6541(b).
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    In Amendment No. 2, Nasdaq also clarified the requirement that, for 
purposes of NASD Rule 6541(b), the inside spread will be defined as the 
difference between ``the best reasonably available bid and offer.'' 
Nasdaq states that this phrase comes from judicial precedent describing 
the broker-dealer's duty of best execution and cites the case of Newton 
v. Merill, Lynch, Pierce, Fenner and Smith.\19\ Nasdaq indicates that, 
by importing this standard into NASD Rule 6541, it will signal to NASD 
members that they must use the same reasonable diligence and care to 
find the best prices when trading OTCBB securities that they use when 
trading Nasdaq National Market and SmallCap securities.
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    \19\ 153 F.3d 266, 271 (3d Cir. 1998) (duty of best execution 
``requires that a broker-dealer seek to obtain for its customer 
orders the most favorable terms reasonably available under the 
circumstances'').
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    Nasdaq believes, however, that the determination of what is 
``reasonably available'' is largely factual and best performed on a 
case-by-case basis. Nasdaq expects that broker-dealers seeking the best 
inter-dealer market for a customer order would, at a minimum, monitor 
not only the OTCBB quotations distributed as part of the Nasdaq Level 1 
service, but also quotations for those same securities in the Pink 
Sheets or any other system of general circulation to broker-dealers 
that regularly disseminates quotations of identified broker-dealers.
    Finally, Nasdaq states in Amendment No. 2 that, to assist members 
in fulfilling their obligations under NASD Rule 6541, it will issue a 
Notice to Members describing the new rule's operation within 30 days 
following Commission approval of the proposal. Nasdaq has stated that 
it will then wait an additional 30 days following publication of this 
Notice to Members before making NASD Rule 6541 operational.

IV. Summary of Comments on Original Proposal

    The Commission received twelve comments on the proposal. Nine of 
the commenters strongly supported Nasdaq's proposal.\20\ The three 
other commenters, while also supporting the application of Manning Rule 
principles to the OTCBB, expressed disappointment that the proposal did 
not go further by establishing limit order protection for all OTCBB 
securities on a permanent basis, rather than for just a selector group 
of OTCBB securities on a pilot basis.\21\
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    \20\ See E-mail from [email protected] to SEC (June 22, 2000); 
E-mail from Al Glenn to SEC (June 22, 2000); E-mail from Dan 
Tramantozzi to SEC (June 22, 2000); E-mail from Mike Mimbach to SEC 
(June 25, 2000); E-mail from R. Richardson to SEC (June 26, 2000); 
Letter from William L. Morrow, Principal, SBX, Inc. to SEC (July 5, 
2000); E-mail from Victor A. Marzarella to SEC (July 13, 2000); E-
mail from Jonathan A. Janssen to SEC (July 13, 2000); E-mail from 
Kenneth Veneziano, Senior Vice President and General Counsel, 
GlobeNet Capital Corporation, to SEC (July 13, 2000) (``GlobeNet E-
mail'').
    \21\ See E-mail from Erol Denizkurt to SEC (June 22, 2000); E-
mail from Jim Mareno to SEC (June 22, 2000); E-mail from T.L. Kimber 
to SEC (June 26, 2000).
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V. Discussion

A. Approval of Proposal

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the 
regulations thereunder applicable to the NASD.\22\ In particular, the 
Commission believes that the proposal is consistent with Section 
15A(b)(6) of the Act.\23\ Section 15A(b)(6) requires, among other 
things, that the rules of a national securities association be designed 
to prevent fraudulent and manipulative acts and practices; to promote 
just and equivalent principals of trade; to remove impediments to the 
perfect the mechanism of a free and open market and a national market 
system; in general, to protect investors and the public interest.
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    \22\ In approving this rule, the Commission has considered its 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \23\ 15 U.S.C. 78o-3(b)(6).
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    When the Commission approved the original proposal that instituted 
limit order protection for Nasdaq securities, it stated:
    The Commission believes that the rule change [which instituted NASD 
IM-2110-2] will enhance investor confidence by improving the quality of 
executions for customers. By giving a customer's limit order priority 
over the marker's proprietary trading, more trade volume will be 
available to be matched with the customer's order, resulting in quicker 
and more frequent executions for customers.
    The NASD's proposal will also improve the price discovery process 
in NASDAQ securities. Limit order aid price discovery by adding 
liquidity to the market and by tightening the spread between the bid 
and ask price of a security. In the past, customers may have refrained 
from placing limit orders because of the uncertainty of the difficulty 
in obtaining an execution at a price between the spread. The new rule 
will encourage dealers to executive customer limit orders in a timely 
fashion so that they may resume their proprietary trading activities. 
The practice of delaying executions until the inside price reaches the 
customer's limit order also impedes price discovery by shielding those 
orders from the rest of the investing public. More expeditious handling 
of customer limit orders * * * will provide investors with a more 
accurate indication of the buy and sell interest at a given moment.\24\
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    \24\ See Exchange Act Release No. 34279 (June 29, 1994), 59 FR 
34883 (July 7, 1994).
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    The Commission finds that the reasons for providing limit order 
protection for customer limit orders in Nasdaq securities, set forth 
above, also apply in the context of OTCBB securities. In the 
Commission's view, the proposed rule change is an appropriate first 
step in bringing limit order protection to the OTCBB, and the pilot 
program will also Nasdaq the opportunity to study the application of 
the new rule for OTCBB securities and to consider further refinements. 
Moreover, the Commission finds that Nasdaq's proposal for selecting the 
number and types of securities to participate in the pilot program to 
be reasonable and consistent with the Act.
    The Commission also believes that the four accommodations made from 
NASD IM-2110-2 to recognize the structure of the OTCBB are reasonable 
and consistent with the Act. In particular, the minimum size threshold 
that qualifies larger orders for an exception to NASD Rule 6541 and the 
hours of effectiveness appropriately recognize the OTCBB environment. 
In addition, the Commission believes that the increment by which OTCBB 
market makers will be required to step ahead of

[[Page 10544]]

customer limit orders--the lesser of $0.05 per share or one-half of the 
current inside spread--is appropriate for the pilot program. As the 
Commission has previously noted, market makers electing to trade ahead 
of customer limit orders must be required to do so by a sufficiently 
large increment, otherwise the benefits of limit orders on price 
competition are lost.\25\ The Commission believes that the proposed 
increment for the pilot program satisfactorily balances the interests 
of providing limit order protection against the benefits of offering 
price improvement. However, the Commission expects that, during the 
pilot period, Nasdaq will study all aspects of new NASD Rule 6541. 
After reviewing the pilot's operation, Nasdaq will have the opportunity 
to propose further refinements to the rule, if necessary.
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    \25\ See Securities Exchange Act Release No. 43084 (July 28, 
2000), 65 FR 48406, 48420 (August 8, 2000) (proposing release for 
rules relating to disclosure of order execution and routing 
practices).
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    In addition, one commenter recommended that NASD Rule 6541 include 
a two-minute standard for contemporaneous executions, rather than five 
minutes proposed by Nasdaq. The Commission believes that the five-
minute standard is a reasonable first step, and that Nasdaq will have 
the opportunity to propose any appropriate refinements to NASD Rule 
6541 at the conclusion of the pilot program.

B. Pilot Program

    The Commission is approving this proposal on a 12-month pilot basis 
ending as of February 8, 2002. As noted above, Nasdaq has stated that 
NASD Rule 6541 will not become operational until 30 days after issuance 
of a Notice to Members discussing the operation of the new rule and 
that the pilot securities will be subject to a phase-in period.

C. Accelerated Approval of Amendment Nos. 1 and 2

    The Commission finds good cause for approving Amendment Nos. 1 and 
2 to the proposal prior to the thirtieth day after the date of public 
of notice in the Federal Register, pursuant to Section 19(b)(2) of the 
Act.\26\ The original proposal has been published in the Federal 
Register, and public comment on the proposal was favorable. The 
Commission believes that Amendment Nos. 1 and 2 do not materially alter 
the original filing, but merely clarify the obligations imposed by NASD 
Rule 6541 in a manner consistent with the obligations that already 
exist with respect to Nasdaq National Market and SmallCap securities. 
The Commission believes, moreover, that approving Amendment Nos. 1 and 
2--which set forth and describe the trading-ahead increment--at the 
same time as the original proposal furthers the investor protection 
goals of the Act.
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    \26\ 15 U.S.C. 78s(b)(2).
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VI. Solicitation of Comments on Amendments Nos. 1 and 2

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment Nos. 1 and 2, including whether the 
amendments are 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-00-22 and should be submitted by March 8, 2001.

VII. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\27\ that the proposed rule change (SR-NASD-00-22) is approved on a 
pilot basis and that Amendment Nos. 1 and 2 thereto are approved on an 
accelerated basis.
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    \27\Id.
    \28\17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\28\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-3800 Filed 2-14-01; 8:45 am]
BILLING CODE 8010-01-M