[Federal Register Volume 67, Number 18 (Monday, January 28, 2002)]
[Notices]
[Pages 3923-3927]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1957]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45319; File No. SR-NASD-2001-69]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change, Amendment No. 1, and Amendment No. 2 Thereto by the National 
Association of Securities Dealers, Inc. Amending NASD Rule 4720 
Relating to the Inclusion of UTP Exchanges in the Nasdaq National 
Market Execution System

January 18, 2002.
    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 5, 2001, 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'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the NASD. 
On December 19, 2001, the NASD submitted Amendment No. 1 to the 
proposed rule change.\3\ On January 16, 2002, the NASD submitted 
Amendment No. 2 to the proposed rule change.\4\ 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, Office of 
General Counsel, Nasdaq, to Katherine England, Assistant Director, 
Division of Market Regulation, SEC, dated December 18, 2001 
(``Amendment No. 1''). In Amendment No. 1, the NASD removed from the 
proposed rule change language related to NASDAQ National Market 
Execution System (``NNMS'') trading through the quotes of UTP 
exchanges that do not participate in the NNMS.
    \4\ See letter from Mary M. Dunbar, Vice President, Office of 
General Counsel, Nasdaq, to Katherine England, Assistant Director, 
Division of Market Regulation, SEC, dated January 16, 2002 
(``Amendment No. 2''). In Amendment No. 2, the NASD amended language 
that: (1) Incorrectly described SelectNet as being included within 
the rubric of the NNMS; (2) defined the term ``Non-Participating UTP 
Exchange;'' and (3) ambiguously referenced the ``Nasdaq system.''
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The NASD proposes to amend NASD Rule 4720 to delineate the use of 
SelectNet by UTP Exchanges. Proposed new language is in italics; 
proposed deletions are in brackets.\5\

4720. SelectNet Service

    (a)-(b) No Change.
    (c) Prohibition Regarding the Entry of Certain Preferenced Orders 
to Nasdaq National Market Execution System Market [Makers] Participants
    (i) For purposes of this rule the term ``Participating UTP 
Exchange'' shall mean any registered national securities exchange that 
elects to participate in the Nasdaq National Market Execution System 
(``NNMS'') and that has unlisted trading privileges in Nasdaq-listed 
securities pursuant to the Joint Self-Regulatory Organization Plan 
Governing The Collection, Consolidation And Dissemination Of Quotation 
And Transaction Information For Nasdaq-Listed Securities Traded On 
Exchanges On An Unlisted Trading Privileges Basis; and
    (ii) Non-Participating UTP Exchanges are prohibited from sending 
SelectNet preferenced orders. No member or Participating UTP Exchange 
shall direct a SelectNet preferenced order to a Non-Participating UTP 
Exchange.
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    \5\ The NASD requested that the Commission alter the originally 
proposed rule language of Rule 4720(c)(i) to reflect the current 
name of the Nasdaq OTC/UTP Plan. Telephone message left by Katherine 
England, Assistant Director, Division of Market Regulation, 
Commission (January 18, 2002) for Jeffrey S. Davis, Assistant 
General Counsel, Office of General Counsel, Nasdaq (January 18, 
2002), and response telephone message left by Jeffrey S. Davis for 
Katherine England (January 22, 2002).
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    (iii) Participating UTP Exchanges must participate in SelectNet and 
the NNMS under the same conditions that apply to Nasdaq market makers, 
as set forth herein.
    (iv) No member or Participating UTP Exchange shall direct a 
SelectNet preferenced order to an NNMS [Nasdaq National Market 
Execution System (``NNMS'')] market maker (as defined in NASD Rule 
4701) [(including that market maker's Agency Quote (as defined in NASD 
Rule 4613)], to an ECN that provides automatic execution against its 
quote through the NNMS, or to a Participating UTP Exchange, unless that 
order is designated as:
    (A) A non-liability order that is entered as an ``All-or-None'' 
order (``AON'') and is at least one normal unit of trading (i.e. 100 
shares) in excess of the displayed quote to which the preferenced order 
is directed; or
    (B) A non-liability order that is entered as a ``Minimum Acceptable 
Quantity'' order (``MAQ''), with a MAQ value of at least one normal 
unit of trading in excess of the displayed quote to which the 
preferenced order is directed; or
    (C) A non-liability order that is entered at a price that is 
inferior to the displayed quote to which the preferenced order is 
directed.

[[Page 3924]]

    (v) The prohibition of this paragraph shall not apply to[:] 
SelectNet preferenced orders sent by a member, or a Participating UTP 
Exchange to an ECN that does not provide automatic execution against 
its quote through NNMS.
    [(A) Preferenced orders sent by a UTP Exchange that does not elect 
to participate in the automatic execution functionality of the NNMS, 
to: (1) An NNMS market maker; (2) another UTP Exchange; (3) an ECN, 
regardless of whether the ECN provides an automatic execution against 
its quote through NNMS; or]
    [(B) Preferenced orders sent by an NNMS market maker to: (1) A UTP 
Exchange that does not participate in the automatic execution 
functionality of the NNMS; (2) an ECN that does not provide an 
automatic execution against its quote through NNMS; or]
    [(C) Preferenced orders sent by an ECN that does not provide an 
automatic execution against its quote through NNMS, to: (1) A UTP 
Exchange that does not elect to participate in the automatic execution 
functionality of the NNMS; (2) an ECN that does not provide an 
automatic execution against its quote through NNMS; or]
    [(D) Preferenced orders sent by a UTP Exchange that elects to 
participate in the automatic execution functionality of the NNMS, to: 
(1) Another UTP Exchange that does not participate in the automatic 
execution functionality of NNMS; (2) an ECN that does not provide an 
automatic execution against its quote through NNMS.]
    [(iv) For purposes of this rule the term ``UTP Exchange'' shall 
mean any registered national securities exchange that elects to 
participate in the NNMS and that has unlisted trading privileges in 
Nasdaq-listed securities pursuant to the Joint Self-Regulatory 
Organization Plan Governing The Collection, Consolidation And 
Dissemination Of Quotation And Transaction Information For Exchange-
Listed Nasdaq/National Market System Securities Traded On Exchanges On 
An Unlisted Trading Privilege Basis (``Nasdaq UTP Plan''). In 
additional, participation in the NNMS by UTP Exchanges is voluntary. If 
a UTP Exchange elects to participate in the NNMS system, the provisions 
of this subparagraph shall apply to UTP Exchanges that choose to 
participate in the NNMS.]
* * * * *

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

    In its filing with the Commission, the NASD included statements 
concerning the purpose of and the 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 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 is proposing to amend NASD Rule 4720 to specify that a UTP 
Exchange will be permitted access to SelectNet on a similar basis that 
it is offered to NASD members. As a result, SelectNet will be available 
only in connection with participation in the Nasdaq National Market 
Execution System (``NNMS'') (hereinafter referred to as ``SuperSOES''). 
The rule change would bring Nasdaq market makers into parity with UTP 
Exchanges, as well as reduce the risk of dual liability for both Nasdaq 
market makers and UTP Exchanges participating in SuperSOES. As set 
forth in more detail below, Nasdaq believes that the rule would also 
limit the possibility of backing away from quotes by UTP Exchanges, and 
would limit the instances of locked/crossed markets among market 
participants that participate in a Nasdaq execution system.
    The proposal is consistent with Nasdaq's long-standing goal to 
improve the quality of its market. Establishing SuperSOES as the 
primary platform for trading Nasdaq-listed securities is a critical 
step in that respect. Nasdaq believes that implementation of SuperSOES 
has significantly improved the Nasdaq Stock Market. In particular, 
Nasdaq's initial assessment based on preliminary data shows that 
SuperSOES orders are processed quickly, enjoy high fill rates, and 
execute at the current market price. Moreover, SuperSOES has not had a 
significant negative impact on spreads, depth or volatility. According 
to Nasdaq, the ease with which the market reopened on September 17 
appears to be directly connected to the efficiency of SuperSOES. In 
addition, SuperSOES has been voluntarily adopted by the Chicago Stock 
Exchange, Inc. (``CHX'') and the Boston Stock Exchange, Inc. (``BSE''), 
which currently represent the vast majority of the trading volume in 
Nasdaq-listed stocks by UTP Exchanges. CHX has participated in 
SuperSOES since it was implemented in July 2001.\6\ As SuperSOES 
becomes a more familiar feature in the Nasdaq market place, Nasdaq 
believes it will benefit Nasdaq market participants and public 
investors by making the operation of Nasdaq more efficient.
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    \6\ In July 2001, the Commission approved a rule change to 
permit UTP Exchanges to participate on a voluntary basis in 
SuperSOES. See Exchange Act Release No. 44526 (July 6, 2001), 66 FR 
36814 (July 13, 2001).
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    Nasdaq states that SuperSOES is improving the operation of the 
Nasdaq Stock Market, however, Nasdaq has identified two areas of 
concern that it believes must be addressed immediately to ensure the 
smooth functioning of Nasdaq's systems. Specifically, permitting UTP 
Exchanges to participate in Nasdaq without automatic execution 
functionality perpetuates the potential for ``dual liability'' that 
Nasdaq designed SuperSOES to eliminate. The potential for dual 
liability exists when market participants, such as UTP Exchanges, send 
SelectNet liability messages to Nasdaq market makers that 
simultaneously receive executions through SuperSOES. Additionally, 
permitting UTP Exchanges to access Nasdaq via SelectNet could disrupt 
and slow the market. To improve the trading environment for all of 
Nasdaq's valued market participants, and to avoid potential significant 
market disruptions, Nasdaq is proposing to require UTP Exchanges that 
choose to participate in Nasdaq to accept automatic executions through 
SuperSOES.
    Background. On January 14, 2000, the Commission approved a rule 
change to establish SuperSOES,\7\ which was implemented for all Nasdaq 
National Market securities on July 30, 2001. SuperSOES is an automated 
execution system that allows the entry of retail as well as principal 
orders for up to 999,999 shares.\8\ By removing the size and capacity 
restrictions from its principal automatic execution system, Nasdaq 
intended for most of the orders executed through Nasdaq's systems to 
migrate to SuperSOES. Consistent with that approach, access to 
SelectNet for NASD members was limited to certain types of non-
liability orders that require negotiation with the receiving market 
participant.\9\
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    \7\ See Exchange Act Release No. 42344 (January 14, 2000), 65 FR 
3987 (January 25, 2000).
    \8\ SOES was limited to small agency orders for customers.
    \9\ As originally developed, SuperSOES allowed market 
participants to enter into SelectNet only those orders that (1) 
specify a minimum acceptable quantity for a size that is at least 
100 shares greater than the posted quote of the receiving market 
participant or (2) All-or-None orders that are at least 100 shares 
in excess of the displayed bid/offer size. Since the original 
proposal, the SEC has also approved the entry of non-liability, 
inferior-priced orders through SelectNet.

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[[Page 3925]]

    As was the case with SOES, Nasdaq market makers are required to 
participate in SuperSOES and, therefore, to accept automatic execution 
against their displayed quotations. However, a subset of Nasdaq market 
participants, Electronic Communications Networks (``ECNs''), as well as 
UTP Exchanges, continue to have their quotes in Nasdaq accessed through 
SelectNet and, as such, are not required to accept automatic 
executions.\10\ Whereas Nasdaq can require, by rule, that its member 
ECNs provide immediate response to an inbound SelectNet order, it has 
no authority to extend that requirement to a UTP Exchange.\11\
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    \10\ ECNs may choose whether or not to take automatic executions 
through SuperSOES. ECNs that choose to take automatic execution 
against their quotes through SuperSOES are refered to as ``Full 
Participant ECNs.'' Full Participant ECNs are not required to take 
liability orders through SelectNet (a ``liability order'' imposes an 
obligation on the market participant that receives the order to 
respond to the order in a manner consistent with the Firm Quote Rule 
(Rule 11Ac1-1 under the Act, 17 CFR 240.11Ac1-1) (e.g. by executing 
the order for that market participant's displayed size). ECNs that 
choose not to take automatic execution against their quotes through 
SuperSOES must continue to take delivery of liability orders against 
their quotes through SelectNet. These ECNs are referred to as 
``Order-Entry ECNs.''
    \11\ The Cincinnati Stock Exchange does not participate in any 
Nasdaq market systems. Instead, it relies on the language in the UTP 
Plan and provides only telephone access to its quotes.
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    According to Nasdaq, SuperSOES increases the speed of executions 
and improves the access of all market participants to the full depth of 
a security's trading interest. The volume and speed at which trading 
occurs in Nasdaq have increased dramatically from when SuperSOES was 
first proposed nearly two and a half years ago. Nasdaq states that 
while SelectNet was adequate as the primary means of UTP Exchange 
access in the past, this is no longer true. Market participants demand 
and require the ability to access liquidity at the best prices 
instantaneously. Because Nasdaq cannot compel UTP Exchanges to provide 
an automated, immediate response to preferenced SelectNet liability 
orders, continuing SelectNet liability functionality for UTP Exchanges 
is not a viable option.
    Moreover, under the rules that established the NNMS, SelectNet 
became primarily a non-liability system for SuperSOES market 
participants. Nasdaq made SelectNet a non-liability system for 
SuperSOES market participants to, among other reasons, provide 
protection for Nasdaq market participants that are required to (i.e., 
Nasdaq market makers), or chose to (i.e., Full Participant ECNs and 
participating UTP Exchanges \12\), take automatic execution against 
their quotes through SuperSOES by limiting the potential for dual 
liability.\13\ The current rules, however, do not offer sufficient 
protection, because they continue to allow UTP Exchanges that do not 
participate in SuperSOES to send preferenced SelectNet liability orders 
to SuperSOES market participants. As a result, dual liability could 
occur if a SuperSOES market participant receives an order from a UTP 
Exchange through SelectNet to which it owes an obligation to execute 
under the NASD's and SEC's firm quote rule, and immediately thereafter 
receives an execution through SuperSOES against the same quote.
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    \12\ Specifically, CHX and BSE have chosen to participate in 
SuperSOES.
    \13\ Dual liability may occur when a market participant has 
simultaneous, multiple obligations with respect to orders that it 
receives from more than one venure. For instance, if a market maker 
is preferenced through SelectNet for its displayed size at the same 
time that it receives an automatic execution order through 
SuperSOES, that market maker is exposed to dual liability for those 
orders. Dual liability can result in a market participant risking 
more capital than it might otherwise desire.
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    Proposed Amendment. To address these problems, Nasdaq is proposing 
to amend NASD Rule 4720 to require that UTP Exchanges that voluntarily 
choose to trade Nasdaq securities through Nasdaq market systems send 
and accept automatic executions through SuperSOES. A UTP Exchange that 
does not wish to use a Nadaq market system would be accessible by 
telephone--the method of access specified in the Nasdaq UTP Plan--or 
via a mutually agreed upon bilateral link created by the UTP 
Exchange.\14\
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    \14\ The Nasdaq UTP Plan governs the trading of Nasdaq-listed 
securities pursuant to unlisted trading privileges. Subsection (b) 
of Section IX of the Nasdaq UTP Plan states, in pertinent part, that 
Plan participants ``shall have direct telephone access to the 
trading desk of each Nasdaq market participant in each [e]ligible 
[s]ecurity in which the [p]articipant displays quotations.'' See 
Section IX, Market Access, of the Nasdaq UTP Plan.
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    Specifically, Nasdaq proposes to allow UTP Exchanges to choose 
whether or not they want to access Nasdaq market systems for order 
processing and execution purposes. If a UTP Exchange elects to 
participate in SuperSOES, the UTP Exchange, like Nasdaq market makers, 
will be permitted access to SelectNet in accordance with the proposed 
changes to paragraph (c) of Rule 4720. Through SuperSOES, UTP Exchanges 
will make their quotes accessible to other market participants, and 
will access the quotes of market markers, Full Participant ECNs, and 
other UTP Exchanges participating in SuperSOES.
    Under this option, UTP Exchanges will use SelectNet on the same 
terms as Nasdaq market makers and ECNs. First, Participating UTP 
Exchanges may direct non-liability orders (as set forth in subparagraph 
(c) of Rule 4720) to SuperSOES market participants. Second, 
Participating UTP Exchanges (similar to Nasdaq market makers) will 
receive via SelectNet only non-liability orders, in order to limit 
their potential for dual liability, as noted above.\15\ This will limit 
any potential dual liability. Third, UTP Exchanges may access quotes of 
Order Entry ECNs with preferenced SelectNet liability orders.
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    \15\ The rules clarify that if a UTP Exchange participates in 
SuperSOES, orders preferenced to the UTP Exchange's quotes must meet 
the Oversized Order Requirement. This restriction is intended to 
limit the potential for dual liability for UTP Exchanges. In 
addition, Nasdaq is proposing non-substantive changes to correct 
drafting errors in the original rule proposal to clarify that orders 
sent to quotes of Order Entry ECNs are not subject to the Oversized 
Order Requirement in the rule, while orders sent to Full Participant 
ECNs are subject to this requirement.
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    If a UTP Exchange elects not to participate in SuperSOES, the UTP 
Exchange's quote will not be accessed through SuperSOES or SelectNet. 
In this case, SuperSOES will not include that UTP Exchange's quotation 
for order processing and execution purposes. UTP Exchanges that choose 
this option would be accessible by telephone as contemplated in the 
Nasdaq UTP Plan,\16\ or via a mutually agreed-upon alternative 
bilateral link created by the UTP Exchange.\17\ Nasdaq welcomes the 
opportunity to explore the possibility of bilateral linkages, which 
Nasdaq anticipates could be formed via separate agreement between 
Nasdaq and the exchange(s).
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    \16\ We note this currently is the method that the Cincinnati 
Stock Exchange has elected to use for trading Nasdaq securities 
under the Nasdaq UTP Plan.
    \17\ This proposal would not preclude a UTP Exchange from 
forming a link with Nasdaq outside Nasdaq's market system or the 
parameters of the NNMS Plan.
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    Nasdaq is proposing these amendments for a number of reasons. 
First, significant changes in market conditions have resulted in the 
need for Nasdaq, via SuperSOES, to increase the speed of executions and 
improve the access of all market participants to the full depth of a 
security's trading interest. According to Nasdaq, the volume and speed 
at which trading occurs in Nasdaq have increased dramatically from when 
SuperSOES was first proposed nearly two and a half years ago. 
Consequently, market

[[Page 3926]]

participants demand and require the ability to access liquidity at the 
best prices instanteously. Nasdaq states that SuperSOES is a 
significant improvement over prior Nasdaq execution systems, and has 
become the backbone of its marketplace by providing market participants 
with a more efficient trading platform as evidenced by faster 
executions, higher fill rates, larger orders, and prices at the best 
bid or best offer.
    According to Nasdaq, while SelectNet--which requires an affirmative 
response in order to trade-- was adequate as the primary means of UTP 
Exchange access in the past, this is no longer true. In 1997, when 
Nasdaq made SelectNet available to UTP Exchanges for liability order 
processing, Nasdaq (inclusive of the only active UTP Exchange at the 
time, CHX) processed an average of 417,224 quote updates and 467,914 
transactions per day.\18\ Over the first seven months of 2001, Nasdaq 
processed an average of 5,822,474 quote updates and 2,757,556 
transactions per day. The need for immediate response by all 
participants who choose to access the Nasdaq market is very clear. 
Because Nasdaq cannot compel UTP Exchanges to provide an automated, 
immediate response to preferenced SelectNet liability orders, it can no 
longer offer SelectNet liability functionality as an option to UTP 
Exchanges.
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    \18\ Theses figures are based on the average daily quote updates 
and trades reported over the first seven months (January through 
July) of 1997.
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    Moreover, Nasdaq believes that this proposal, requiring a UTP 
Exchange to participate in SuperSOES if the UTP Exchange wishes to 
access Nasdaq via Nasdaq's own systems, is consistent with prior SEC 
statements in the context of alternative trading systems (``ATSs''). In 
the release adopting Regulation ATS, the Commission stated its concern 
that an ATS should respond to orders entered by non-participants (e.g., 
broker-dealers that access the ATS through a linkage like SelectNet) no 
slower than it responds to orders entered by subscribers.\19\ The 
Commission addressed this concern by establishing a principle that 
underscores the importance of each market establishing the parameters 
and automation of its system, specifically the Commission stated 
``[a]ny SRO to which alternative trading systems may be linked, may 
determine that it is necessary for the fair and orderly operation of 
its market to require that publicly displayed alternative trading 
system orders be subject to automatic execution.'' \20\ Nasdaq believes 
that the Commission should apply this principle to Nasdaq's current 
proposal for UTP Exchange participation in SuperSOES.
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    \19\ Regulation of Exchanges and Alternative Trading Systems, 
Exchange Act Release No. 40760 (December 8, 1998), 63 FR 70844 
(December 22, 1998), at Section IV.2.c.(iii)(A).
    \20\ Id.
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    Second, Nasdaq believes it is appropriate to minimize the potential 
for dual liability in the Nasdaq market by requiring UTP Exchanges to 
participate in SuperSOES. The possibility of dual liability arising 
from a UTP Exchange that accesses the Nasdaq market through SelectNet 
was not a major concern at the time the SuperSOES rules were adopted. 
At that time, only CHX traded Nasdaq securities, CHX's volume was 
minimal, and CHX, in fact, chose to accept automatic execution by 
participating in SuperSOES. Recently, however, there has been renewed 
interest by other regional stock exchanges in trading Nasdaq-listed 
securities on a UTP basis. In fact, a number of new participants joined 
the Nasdaq UTP Plan subsequent to Nasdaq proposing SuperSOES, and these 
exchanges have indicated an interest in trading Nasdaq-listed 
securities in the coming weeks and months. According to Nasdaq, 
although CHX elected to participate in SuperSOES--temporarily 
eliminating the potential for dual liability--the imminent entry of 
other UTP Exchanges trading Nasdaq securities reintroduces the 
potential of dual liability to all SuperSOES market participants.
    Third, participation in SuperSOES by a UTP Exchange is a voluntary 
action by each exchange. Nasdaq states that it is not obligated to 
provide UTP Exchanges with access to any of Nasdaq's proprietary 
systems. Therefore, Nasdaq believes it is entirely appropriate to limit 
UTP Exchange access to Nasdaq's most efficient system. Nasdaq's 
voluntary action, designed to improve efficiency and maintain an 
orderly market, should not become an opportunity for a Nasdaq 
competitor to harm the ability of Nasdaq to improve its markets.
    Overall, Nasdaq believes it is appropriate to alter the terms under 
which a UTP Exchange participates in the Nasdaq market to address all 
of the concerns described in this proposal. Nasdaq is committed to 
operating a fair, orderly, efficient marketplace for the benefit of all 
investors in Nasdaq-listed securities, and this proposal is essential 
to Nasdaq's ability to meet that commitment.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A(b)(6) \21\ of the Act, which requires, 
among other things, that the NASD's rules be designed to facilitate 
transactions in securities, 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 
particular, Nasdaq believes that requiring a UTP Exchange that chooses 
to participate in the Nasdaq market also to participate in SuperSOES is 
necessary for the fair and orderly operation of the Nasdaq Stock Market 
by helping to reduce the potential for order queuing or for system 
stoppages, when a UTP Exchange's quote is inaccessible and is alone at 
the best bid or best offer.
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    \21\ 15 U.S.C. 78o-3(b)(6).
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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

    Written comments were neither solicited nor received.

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 NASD 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

[[Page 3927]]

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-2001-69 and should be 
submitted by February 19, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-1957 Filed 1-25-02; 8:45 am]
BILLING CODE 8010-01-M