[Federal Register Volume 66, Number 121 (Friday, June 22, 2001)]
[Notices]
[Pages 33593-33597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-15677]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44423; File No. SR-NASD-2001-34]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to Amendments to the Restated Certificate of Incorporation of The 
Nasdaq Stock Market, Inc.

June 13, 2001.
    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 May 8, 2001, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association''), through its 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. On June 4, 2001 the NASD filed Amendment No. 1 to the 
Proposal.\3\ 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 Mary M. Dunbar, Vice President, Nasdaq, to 
Katherine England, Assistant Director, Division of Market 
Regulation, Commission, dated June 12, 2001 (``Amendment No. 1''). 
In Amendment No. 1, Nasdaq changed the term ``debenture'' to 
``note'' throughout the proposed rule text and filing, and clarified 
the circumstances under which Hellman and Friedman would be entitled 
to an exemption from the restriction contained in the Restated 
Certificate of Incorporation that prohibits any beneficial owner of 
more than five percent of common stocks or notes from voting those 
excess shares or notes.
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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 its Restated Certification of 
Incorporation (``Certificate''). Additions are italicized; deletions 
are bracketed.
* * * * *

Restated Certificate of Incorporation of the NASDAQ Stock Market, Inc.

* * * * *

Article Fourth

    A. No change.
    B. No change.
    C. 1. (a) Except as may otherwise be provided in this Restated 
Certificate of Incorporation (including any Preferred Stock 
Designation) or by applicable law, each holder of Common Stock, as 
such, shall be entitled to one vote for each shore of Common Stock 
held of record by such holder on all matters on which stockholders 
generally are entitled to vote, and no holder of any series of 
Preferred Stock, as such, shall be entitled to any voting powers in 
respect thereof.
    (b) Except as may otherwise be provided in this Restated 
Certificate of Incorporation or by applicable law, the holders of 
the 4.0% Convertible Subordinate Notes due 2006 (the ``Notes'') 
which may be issued from time to time by Nasdaq shall be entitled to 
vote on all matters submitted to a vote of the stockholders of 
Nasdaq, voting together with the holders of the Common Stock (and of 
any other shares of capital stock of Nasdaq entitled to vote at a 
meeting of stockholders) as one class. Each principal amount of 
Notes shall be entitled to a number of votes equal to the number of 
votes represented by the Common Stock of Nasdaq that could then be 
acquired upon conversion of such principal amount of Notes into 
Common Stock, subject to adjustments as provided in the Notes. 
Holders of the Notes shall be deemed to be stockholders of Nasdaq, 
and the Notes shall be deemed to be shares of stock, solely for the 
purpose of any provision of the General Corporation Law of the State 
of Delaware or this Restated Certificate of Incorporation that 
requires the vote of stockholders as a prerequisite to any corporate 
action.
    2. Notwithstanding any other provision of this Restated 
Certificate of Incorporation, but subject to subparagraph 6 of this 
paragraph C. of this Article Fourth, in no event shall (i) any 
record owner of any outstanding Common Stock which is beneficially 
owned, directly or indirectly, as of any record date for the 
determination of stockholders and/or holders of Notes entitled to 
vote on any matter, or (ii) any holder of any Notes which are 
beneficially owned, directly or indirectly, as of any record date 
for the determination of stockholders and/or holders of Notes 
entitled to vote on any matter, by a person (other than an Exempt 
Person) who beneficially owns shares of Common Stock and/or Notes 
(``Excess Shares and/or Notes'') in excess of five percent (5%) of 
the then-outstanding shares of Common Stock, be entitled or 
permitted to vote any Excess Shares and/or Notes. For all purposes 
hereof, any calculation of the number of shares of Common Stock 
outstanding at any particular time, including for purposes of 
determining the particular percentage of such outstanding shares of 
Common Stock of which any person is the beneficial owner, shall be 
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of 
the General Rules and Regulations under the Securities Exchange Act 
of 1934, as amended (the ``Exchange Act''), as in effect on the date 
of filing this Restated Certificate of Incorporation.
    3. The following definitions shall apply to this paragraph C. of 
this Article Fourth:
    (a) ``Affiliate'' shall have the meaning ascribed to that term 
in Rule 12b-2 of the General Rules and Regulations under the 
Exchange Act, as in effect on the date of filing this Restated 
Certificate of Incorporation.
    (b) A person shall be deemed the ``beneficial owner'' of, shall 
be deemed to have ``beneficial ownership'' of and shall be deemed to 
``beneficially own'' any securities:

[[Page 33594]]

    (i) which such person or any of such person's Affiliates is 
deemed to beneficially own, directly or indirectly, within the 
meaning of Rule 13d-3 of the General Rules and Regulations under the 
Exchange Act as in effect on the date of the filing of this Restated 
Certificate of Incorporation;
    (ii) which such person or any of such person's Affiliates has 
(A) the right to acquire (whether such right is exercisable 
immediately or only after the passage of time) pursuant to any 
agreement, arrangement or understanding (other than customary 
agreements with and between underwriters and selling group members 
with respect to a bona fide public offering of securities), or upon 
the exercise of conversion rights, exchange rights, rights, warrants 
or options, or otherwise; provided, however, that a person shall not 
be deemed the beneficial owner of, or to beneficially own, 
securities tendered pursuant to a tender or exchange offer made by 
or on behalf of such person or any of such person's Affiliates until 
such tendered securities are accepted for purchase; or (B) the right 
to vote pursuant to any agreement, arrangement or understanding; 
provided, however, that a person shall not be deemed the beneficial 
owner of, or to beneficially own, any security by reason of such 
agreement, arrangement or understanding if the agreement, 
arrangement or understanding to vote such security (1) arises solely 
from a revocable proxy or consent given to such person in response 
to a public proxy or consent solicitation made pursuant to, and in 
accordance with, the applicable rules and regulations promulgated 
under the Exchange Act and (2) is not also then reportable on 
Schedule 13D under the Exchange Act (or any comparable or successor 
report); or
    (iii) which are beneficially owned, directly or indirectly, by 
any other person and with respect to which such person or any of 
such person's Affiliates has any agreement, arrangement or 
understanding (other than customary agreements with and between 
underwriters and selling group members with respect to a bona fide 
public offering of securities) for the purpose of acquiring, 
holding, voting (except to the extent contemplated by the proviso to 
(b)(ii)(B) above) or disposing of such securities; provided, 
however, that (A) no person who is an officer, director or employee 
of an Exempt Person shall be deemed, solely by reason of such 
person's status or authority as such, to be the ``beneficial owner'' 
of, to have ``beneficial ownership'' of or to ``beneficially own'' 
any securities that are ``beneficially owned'' (as defined herein), 
including, without limitation, in a fiduciary capacity, by an Exempt 
Person or by any other such officer, director or employee of an 
Exempt Person, and (B) the Voting Trustee, as defined in the Voting 
Trust Agreement by among Nasdaq, the National Association of 
Securities Dealers, Inc., a Delaware corporation (the ``NASD''), and 
The Bank of New York, a New York banking corporation, as such may be 
amended from time to time (the ``Voting Trust Agreement''), shall 
not be deemed, solely by reason of such person's status or authority 
as such, to be the ``beneficial owner'' of, to have ``beneficial 
ownership'' of or to ``beneficially own'' any securities that are 
governed by and held in accordance with the Voting Trust Agreement.
    (c) A ``person'' shall mean any individual, firm, corporation, 
partnership, limited liability company or other entity.
    (d) ``Exempt Person'' shall mean Nasdaq or any Subsidiary of 
Nasdaq, in each case including, without limitation, in its fiduciary 
capacity, or any employee benefit plan of Nasdaq or of any 
Subsidiary of Nasdaq, or any entity or trustee holding Common Stock 
for or pursuant to the terms of any such plan or for the purpose of 
funding any such plan or funding other employee benefits for 
employees of Nasdaq or of any Subsidiary of Nasdaq.
    (e) ``Subsidiary'' of any person shall mean any corporation or 
other entity of which securities or other ownership interests having 
ordinary voting power sufficient to elect a majority of the board of 
directors or other persons performing similar functions are 
beneficially owned, directly or indirectly, by such person, and any 
corporation or other entity that is otherwise controlled by such 
person.
    (f) The Board shall have the power to construe and apply the 
provisions of this paragraph C. of this Article Fourth and to make 
all determination necessary or desirable to implement such 
provisions, including, but not limited to, matters with respect to 
(1) the number of shares of Common Stock beneficially owned by any 
person, (2) the number of Notes beneficially owned by any person, 
(3) whether a person is an Affiliate of another, ([3]4) whether a 
person has an agreement, arrangement or understanding with another 
as to the matters referred to in the definition of beneficial 
ownership, ([4]5) the application of any other definition or 
operative provision hereof to the given facts, or ([5]6) any other 
matter relating to the applicability or effect of this paragraph C. 
of this Article Fourth.
    (4) The Board shall have the right to demand that any person who 
is reasonably believed to hold of record or beneficially own Excess 
Shares and/or Notes supply Nasdaq with complete information as to 
(a) the record owner(s) of all shares and/or Notes beneficially 
owned by such person who is reasonably believed to own Excess Shares 
and/or Notes, and (b) any other factual matter relating to the 
applicability or effect of this paragraph C. of this Article Fourth 
as may reasonably be requested of such person.
    5. Any constructions, applications, or determinations made by 
the Board, pursuant to this paragraph C. of this Article Fourth, in 
good faith and on the basis of such information and assistance as 
was then reasonably available for such purpose, shall be conclusive 
and binding upon Nasdaq [and], its stockholders and the holders of 
the Notes.
    6. Notwithstanding anything herein to the contrary, subparagraph 
2 of this paragraph C. of this Article Fourth shall not be 
applicable to any Excess Shares and/or Notes beneficially owned by 
(a) the NASD or its Affiliates until such time as the NASD 
beneficially owns five percent (5%) or less of the outstanding 
shares of Common stock [or] and/or Notes, (b) any other person as 
may be approved for such exemption by the Board prior to the time 
such person beneficially owns more than five percent (5%) of the 
outstanding shares of Common Stock and/or Notes or (c) Hellman & 
Friedman Capital Partners IV, L.P., H&F International Partners IV-A, 
L.P., Hellman & Friedman International Partners IV-B, L.P., and H&F 
Executive Fund, L.P. if the Board has approved an exemption for any 
other person pursuant to Section 6(b) of this paragraph C. of this 
Article Fourth (other than an exemption granted in connection with 
the establishment of a strategic alliance with another exchange or 
similar market). The Board, however, may not approve an exemption 
under [this] Section 6(b): (i) for a registered broker or dealer or 
an Affiliate thereof (provided that, for these purposes, an 
Affiliate shall not be deemed to include an entity that either owns 
ten percent or less of the equity of a broker or dealer, or the 
broker or dealer accounts for one percent or less of the gross 
revenues received by the consolidated entity); or (ii) an individual 
or entity that is subject to a statutory disqualification under 
Section 3(a)(39) of the Exchange Act. The Board, may approve an 
exemption for any other stockholder or holder of Notes if the Board 
determines that granting such exemption would (A) not reasonably be 
expected to diminish the quality of, or public confidence in, The 
Nasdaq Stock Market or the other operations of Nasdaq, on the 
ability to prevent fraudulent and manipulative acts and practices 
and on investors and the public, and (B) promote just and equitable 
principles of trade, foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to and facilitating transactions in 
securities or assist in the removal of impediments to or perfection 
of the mechanisms for a free and open market and a national market 
system.
    7. In the event any provision (or portion thereof) of this 
paragraph C. of this Article Fourth shall be found to be invalid, 
prohibited or unenforceable for any reason, the remaining provisions 
(or portions thereof) of this paragraph C. of this Article Fourth 
shall remain in full force and effect, and shall be construed as if 
such invalid, prohibited or unenforceable provision (or portion 
hereof) had been stricken herefrom or otherwise rendered 
inapplicable, it being the intent of Nasdaq [and], its stockholders 
and the holders of the Notes that each such remaining provision (or 
portion thereof) of this paragraph C. of this Article Fourth 
remains, to the fullest extent permitted by law, applicable and 
enforceable as to all stockholders and all holders of Notes, 
including stockholders and holders of Notes that beneficially own 
Excess Shares and/or Notes, notwithstanding any such finding.
* * * * *

Article Ninth

    Nasdaq reserves the right to amend, alter, change, or repeal any 
provisions contained in this Restated Certificate of Incorporation, 
in the manner now or hereafter prescribed by statute, and all rights 
conferred herein are granted subject to this reservation; provided, 
however, that the affirmative vote of the

[[Page 33595]]

holders of at least 66\2/3\% of the voting power of the outstanding 
Voting Stock, voting together as a single class, shall be required 
to amend, repeal or adopt any provision inconsistent with paragraph 
C. of Article Fourth, Article Fifth, Article Seventh, Article Eighth 
or this Article Ninth; provided further, however, the affirmative 
vote of at least 66\2/3\% of the voting power of the holders of the 
outstanding Notes shall also be required to (i) amend paragraph C. 
of Article Fourth in a manner that would adversely affect the rights 
of the holders of the Notes thereunder without similarly affecting 
the rights of the holders of the Common Stock thereunder or (ii) 
amend this clause.
* * * * *

Article Eleventh

    In light of the unique nature of Nasdaq and its operations and 
in light of Nasdaq's status as a self-regulatory organization, the 
Board of Directors, when evaluating (A) any tender or exchange offer 
or invitation for tenders of exchanges, or proposal to make a tender 
or exchange offer or request or invitation for tenders or exchanges, 
by another party, for any equity security of Nasdaq, (B) any 
proposal or offer by another party to (1) merge or consolidate 
Nasdaq or any subsidiary with another corporation or other entity, 
(2) purchase or otherwise acquire all or a substantial portion of 
the properties or assets of Nasdaq or any subsidiary, or sell or 
otherwise dispose of to Nasdaq or any subsidiary all or a 
substantial portion of the properties or assets of such other party, 
or (3) liquidate, dissolve, reclassify the securities of, declare an 
extraordinary dividend of, recapitalize or reorganize Nasdaq, (C) 
any action, or any failure to act, with respect to any holder or 
potential holder of Excess Shares and/or Notes subject to the 
limitations set forth in subparagraph 2 of paragraph C. of Article 
Fourth, (D) any demand or proposal, precatory or otherwise, on 
behalf of or by a holder or potential holder of Excess Shares and/or 
Notes subject to the limitations set forth in subparagraph 2 of 
paragraph C. of Article Fourth or (E) any other issue, shall, to the 
fullest extent permitted by applicable law, take into account all 
factors that the Board of Directors deems relevant, including, 
without limitation, to the extent deemed relevant, (i) the potential 
impact thereof on the integrity, continuity and stability of The 
Nasdaq Stock Market and the other operations of Nasdaq, on the 
ability to prevent fraudulent and manipulative acts and practices 
and on investors and the public, and (ii) whether such would promote 
just and equitable principles of trade, foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to and facilitating transactions 
in securities or assist in the removal of impediments to or 
perfection of the mechanisms for a free and open market and a 
national market system.
* * * * *

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 rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq has prepared summaries, set fort 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
    The purpose of the proposed rule change is to amend the Certificate 
to afford the holders of 4.0% Convertible Subordinated Notes due 2006 
(the ``Notes'') the right to vote with Nasdaq stockholders. Nasdaq has 
sold $240 million of the Notes to Hellman & Friedman Capital Partners 
IV. L.P., H&F International Partners IV-A, L.P., H&F International 
Partners IV-B, L.P., and H&F Executive Fund IV. L.P. (collectively the 
``HFCP IV LPs''). The Notes are convertible at any time during a five-
year period into shares of Nasdaq common stock at a conversion price of 
$20 per share; thus, the Notes purchased by the HFCP IV LPs would be 
convertible into 12,000,000 shares of Nasdaq common stock.
    Nasdaq and the NASD have entered into an agreement pursuant to 
which Nasdaq has used substantially all of the cash raised from the 
sale of the Notes to repurchase outstanding shares of Nasdaq common 
stock owned by the NASD. The purchase of shares from the NASD allows 
the NASD and Nasdaq to reduce the NASD's ownership interest in Nasdaq 
without diluting other existing equity holders in Nasdaq. The NASD 
will, however, retain voting control of Nasdaq until Nasdaq obtains 
approval of its application to register as a securities exchange, which 
it submitted to the Commission on November 9, 2000.\4\ Prior to 
exchange registration, Nasdaq's activities that involve functions or 
responsibilities of a registered securities association will be subject 
to the NASD's oversight under the Plan of Allocation and Delegation by 
NASD to Subsidiaries, as approved by the Commission, as well as the 
NASD's voting control.
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    \4\ Certain exhibits to Nasdaq's application were incomplete, 
and therefore on March 15, 2001, Nasdaq submitted to the Commission 
revised exhibits to address the deficiencies. As a result, Nasdaq's 
Form 1 was completed and officially filed with the Commission on 
March 15, 2001.
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Article Fourth

    Paragraph C.1. Nasdaq proposes to amend this paragraph of the 
Certificate to provide that holders of the Notes have the right to vote 
with Nasdaq stockholders, with each holder of Notes entitled to a 
number of votes equal to the number of shares of common stock such 
holder would obtain upon conversion of the principal among of Notes 
held by such person. The amendment will also provide that holders of 
Notes shall be deemed to be stockholders and the Notes shall be deemed 
to be shares of stock solely for the purposes of provisions of the 
Delaware General Corporation Law and the Certificate that require the 
vote of stockholders as a prerequisite to corporate action.
    Paragraph C.2. Nasdaq proposes to amend the provision of the 
Certificate that imposes restrictions on stockholders voting shares in 
excess of 5% of outstanding stock. The amendment would make the same 
restriction applicable to holders of the Notes. Any person who 
beneficially owns shares of common stock and/or Notes in excess of 5% 
of then then-outstanding shares of common stock would not be permitted 
to vote such excess shares and/or Notes. As is true under the current 
Certificate, the calculation of the number of shares of common stock 
outstanding at any particular time is to be made in accordance with the 
last sentence of SEC Rule 13d-3(d)(1)(i).\5\ As a result, shares of 
common stock that may be acquired by a holder of Notes through 
conversion would be deemed to be outstanding for purposes of 
calculating the voting power owned by such holder.
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    \5\ 17 CFR 240.13d-3(d)(1)(i).
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    Paragraph C.3.(f), C.4., and C.5. Currently, these paragraphs (1) 
authorize the Nasdaq Board of Directors to make determinations 
necessary to implement Paragraph C of Article Fourth of the 
Certificate, including determinations about stockholders' beneficial 
ownership of shares, (2) empower the Nasdaq Board of Directors to 
demand that any person who is reasonably believed to be the beneficial 
owner of shares in excess of the 5% voting limitation provide 
information about such person's ownership interests, and (3) provide 
that determinations made by the Nasdaq Board of Directors to implement 
Paragraph C of Article Fourth of the Certificate are conclusive and 
binding

[[Page 33596]]

upon Nasdaq and its stockholders. Nasdaq proposes to amend these 
paragraphs to include conforming references to the Notes.
    Paragraph C.6. Currently, this paragraph provides that the 5% 
voting limitation does not apply to (1) the NASD or its affiliates 
until such time as the NASD beneficially owns 5% or less of Nasdaq's 
outstanding common stock, or (2) any other person that the Nasdaq Board 
of Director may exempt prior to the time that such person beneficially 
owns more than 5% of the outstanding shares of common stock. The 
paragraph also provides that the Board may not approve an exemption 
from the 5% limit for a registered broker or dealer or an affiliate 
thereof \6\ or a person that is subject to a statutory disqualification 
under Section 3(a)(39) of the Act.\7\ In addition, before granting an 
exemption, the Nasdaq Board must make certain findings with respect to 
the effect of an exemption on enumerated aspects of Nasdaq's regulatory 
obligations.
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    \6\ A small number of the limited partners of the HFCP IV LPs 
are registered broker/dealers or affiliates of registered broker/
dealers (the ``Broker/Dealer Investors''). The Certificate provides 
that Nasdaq may not exempt a registered broker/dealer or an 
affiliate thereof from the 5% voting limitation. The Certificate 
defines ``affiliate'' with reference to SEC Rule 12b-2, 17 CFR 
240.12b-2, which in turn defines an ``affiliate'' of a specified 
person as ``a person that directly, or indirectly through one or 
more intermediaries, controls, or is controlled by, or is under 
common control with, the person specified.'' The interests of the 
Broker/Dealer Investors in the HFCP IV LPs are minimal. Moreover, 
the limited partnership agreements that govern the HFCP IV LPs 
provide that the limited partners shall take no part in the control 
or management of the business or affairs of the limited partnership, 
nor shall they have any authority to act for or on behalf of the 
limited partnership. Accordingly, the HFCP IV LPs are not affiliates 
of the Broker/Dealer Investors. Similarly, the investment by the 
HFCP IV LPs in Nasdaq will not raise issues under proposed Rule 
2130, as proposed in Nasdaq's application for registration as a 
national securities exchange, if the Broker/Dealer Investors or any 
of their affiliates become members of Nasdaq following its 
registration as a national securities exchange. Proposed Rule 2130 
provides that no Nasdaq member or person associated with a member 
may be the beneficial owner of more than 5% of the outstanding 
shares of Nasdaq's common stock, and further provides that the term 
``beneficial owner'' shall have the meaning set forth in Article 
Fourth, Paragraph C of the Certificate. Because the Broker/Dealer 
Investors do not meet the definition of ``beneficial owner'' in 
Article Fourth, Pargraph C of the Certificate, beneficial ownership 
of the Notes (and the common stock underlying the Notes) would not 
be attributable to them for purposes of proposed Rule 2130.
    \7\ 15 U.S.C. 78c(a)(39).
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    The proposed rule amendment would add conforming references to the 
Notes and would also provide that the HFCP IV LPs will be exempted from 
the 5% voting limitation if the Nasdaq Board of Directors approves an 
exemption from the 5% voting limitation for any other person (other 
than an exemption granted in connection with the establishment of a 
strategic alliance with another exchange or similar market). This 
exemption would not apply to any other person to whom the HFCP IV LPs 
might transfer Notes and/or common stock.
    Paragraph C.7. This paragraph is a savings clause that provides 
that if any portion of Paragraph C. of Article Fourth of the 
Certificate is found to be invalid, the validity of remaining 
provisions shall not be affected. Nasdaq proposes to amend the 
paragraph to include conforming references to the Notes.

Article Ninth

    Nasdaq proposes to amend this article to provide that a two-third 
vote of the holders of outstanding Notes is required (1) to amend 
Paragraph C. of Article Fourth of the Certificate in a manner that 
would adversely affect the rights of the holders of the Notes without 
similarly affecting the rights of stockholders or (2) to amend such 
two-thirds voting requirement.

Article Eleventh

    This article authorizes the Nasdaq Board of Directors to consider 
the effect of proposed corporate action on enumerated aspects of 
Nasdaq's regulatory obligations. Nasdaq proposes to amend the provision 
to include conforming references to the Notes.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A(b)(2) and (6) of the Act, which require, 
among other things, that the Association be so organized and have the 
capacity to be able to carry out the purposes of the Act and to comply 
with and enforce compliance with the provisions of the Act, and that 
the Association's rules are designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. Nasdaq believes that the changes proposed to its 
Certificate are consistent with maintaining the 5% voting limitation 
that is currently contained in the Certificate, which serves the public 
interest by ensuring that certain individuals and entities cannot gain 
undue influence over the operations of Nasdaq. In its order approving 
the Certificate, the Commission found that this 5% voting limitation 
and other limitations affecting the control of Nasdaq fulfill the 
obligations arising under Section 15A(b)(2) and (6).\8\
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    \8\ See Securities Exchange Act Release No. 42983 (June 26, 
2000), 65 FR 41116 (July 3, 2000) (File No. SR-NASD-00-27).
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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.

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

    Nasdaq neither solicited nor received comments on the proposed rule 
change.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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.

[[Page 33597]]

SR-NASD-2001-34 and should be submitted by July 13, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-15677 Filed 6-21-01; 8:45 am]
BILLING CODE 8010-01-M