[Federal Register Volume 67, Number 107 (Tuesday, June 4, 2002)]
[Notices]
[Pages 38535-38538]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13873]



[[Page 38535]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45990; File No. SR-NASD-00-76]


Self-Regulatory Organizations; Order Approving a Proposed Rule 
Change and Amendment Nos. 1, 2, and 3 Thereto by the National 
Association of Securities Dealers, Inc. Relating to Locked and Crossed 
Markets That Occur at or Prior to the Market Open

May 28, 2002.

I. Introduction

    On January 5, 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''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend the provisions of NASD 
Rule 4613(e)(1)(C), ``Locked and Crossed Markets,'' to revise the use 
of Trade-or-Move Messages during locked and crossed market conditions 
that occur prior to the market's opening, and to add provisions 
relating to the use of Trade-or-Move Messages prior to the market's 
close. On January 22, 2001, the NASD, through Nasdaq, filed Amendment 
No. 1 to the proposed rule change.\3\ The proposed rule change and 
Amendment No. 1 were published for comment in the Federal Register on 
February 7, 2001.\4\ The Commission received seven comment letters 
regarding the proposal.\5\ Nasdaq responded to the commenters in 
Amendment Nos. 2 and 3 to the proposal, which the NASD, through Nasdaq, 
filed with the Commission on August 13, 2001,\6\ and February 21, 
2002,\7\ respectively. Amendment Nos. 2 and 3 were published for 
comment in the Federal Register on March 11, 2002.\8\ The Commission 
received three comment letters regarding Amendment Nos. 2 and 3.\9\ The 
NASD, through Nasdaq, responded to the comments regarding Amendment 
Nos. 2 and 3 on April 5, 2002,\10\ and on April 16, 2002,\11\ 
respectively. This order approves the proposed rule change and 
Amendment Nos. 1, 2, and 3.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Jeffrey S. Davis, Assistant General Counsel, 
Nasdaq, to Sapna C. Patel, Attorney, Division of Market Regulation 
(``Division''), Commission, dated January 19, 2001 (``Amendment No. 
1''). In Amendment No. 1, Nasdaq made a minor technical correction 
to the rule text.
    \4\ See Securities Exchange Act Release No. 43913 (January 31, 
2001), 66 FR 9394.
    \5\ See letter from Mark R. Grewe, Managing Director, NDB 
Capital Markets, L.P., to Jonathan G. Katz, Secretary, Commission, 
dated February 27, 2001 (``NDB Letter''); letter from Martin 
Cunningham, Senior Vice President Trading, Schwab Capital Markets 
L.P. (``Schwab''), to Jonathan G. Katz, Secretary, Commission, dated 
February 28, 2001 (``Schwab Letter''); letter from Richard B. Levin, 
Assistant General Counsel and Regulatory Affairs Officer, Knight 
Securities, L.P. (``Knight''), to the Commission, dated March 1, 
2001 (``Knight Letter''); letter from Kim Bang, President, Bloomberg 
Tradebook LLC (``Bloomberg''), to the Commission, dated March 15, 
2001 (``Bloomberg Letter''); letter from Timothy G. Grazioso, 
Subcommittee Chairman, Trading Issues Committee, Security Traders 
Association (``STA''), Michael T. Bird, Chairman, Trading Issues 
Committee, STA, and Geoffrey W. Cloud, Counsel, Trading Issues 
Committee, STA, to Jonathan G. Katz, Secretary, Commission, dated 
March 13, 2001 (``STA Letter''); letter from Kevin J.P. O'Hara, 
General Counsel, Archipelago, L.L.C. (``Archipelago'') to Jonathan 
G. Katz, Secretary, Commission, dated April 3, 2001 (``Archipelago 
Letter''); and letter from William O'Brien, Senior Vice President & 
General Counsel, The BRUT ECN, L.L.C., (``BRUT'') to the Commission, 
dated April 17, 2001 (``BRUT Letter'').
    \6\ See letter (with attachment) from Eugene A. Lopez, Senior 
Vice President, Nasdaq, to Belinda Blaine, Associate Director, 
Division, Commission, dated August 10, 2001 (``Amendment No. 2''). 
In Amendment No. 2, Nasdaq responds to the commenters and proposes 
to revise its original proposal to: (1) require electronic 
communications networks (``ECNs'') to send Trade-or-Move Messages 
prior to entering locking or crossing quotes and require market 
makers to send Trade-or-Move Messages after entering locking or 
crossing quotes; (2) reduce the time to respond to a Trade-or-Move 
Message to 10 seconds; (3) provide a 10,000-share minimum share 
requirement for Trade-or-Move Messages for Nasdaq 100 and S&P 400 
issues; (4) prohibit all market participants from entering locking 
or crossing quotes between 9:29:30 a.m. and 9:29:59 a.m.; and (5) 
delete provisions imposing Trade-or-Move requirements between 3:50 
p.m. and 4 p.m.
    \7\ See letter from Jeffrey S. Davis, Nasdaq, to John Polise, 
Senior Special Counsel, Division, Commission, dated February 21, 
2002 (``Amendment No. 3''). In Amendment No. 3, Nasdaq responds to 
comments from BRUT and clarifies a misstatement in Amendment No. 2. 
Specifically, Amendment No. 3 states that the requirement that ECNs 
send Trade-or-Move Messages prior to entering locking or crossing 
quotes applies to all orders that ECNs receive and is not limited to 
agency orders, as stated incorrectly in Amendment No. 2.
    \8\ See Securities Exchange Act Release No. 45508 (March 5, 
2002), 67 FR 10956 (``March 11 Release'').
    \9\ See letter from Joshua Levine to [email protected], 
Commission, dated April 1, 2002 (``Levine Letter''); letter from 
Keith Brickman, Managing Director, Morgan Stanley, Inc. (``Morgan 
Stanley''), to Jonathan G. Katz, Secretary, Commission, dated April 
4, 2002 (``Morgan Stanley Letter''); and letter from Chris Holter, 
Head of OTC Trading, and Betsy Prout Lefler, Director, Equity 
Capital Markets Compliance, First Union Securities, Inc. (``First 
Union''), to Commission, dated April 5, 2002 (``First Union 
Letter'').
    \10\ See letter from Jeffrey S. Davis, Associate General 
Counsel, Nasdaq, to Yvonne Fraticelli, Special Counsel, Division, 
Commission, dated April 5, 2002 (``April 5 Letter''). In the April 5 
Letter, Nasdaq states its reasons for retaining the Trade-or-Move 
requirements rather than requiring market participants to enter firm 
quotes prior to the market opening, as the commenter suggests.
    \11\ See letter from Jeffrey S. Davis, Associate General 
Counsel, Nasdaq, to Yvonne Fraticelli, Special Counsel, Division, 
Commission, dated April 15, 2002 (``April 15 Letter''). As discussed 
more fully below, in the April 15 Letter, Nasdaq addressed concerns 
raised in the Morgan Stanley Letter and First Union Letter.
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II. Description of the Proposed Rule Change

A. Background

    In its original rule proposal, Nasdaq proposed amendments to NASD 
Rule 4613(e)(1)(C) that would alter the obligations of market makers 
and ECNs during locked and crossed markets that occur prior to the 
market's open and also prior to the close. Specifically, Nasdaq 
originally proposed to: (1) Extend the application of NASD Rule 
4613(e)(1)(C)(ii) regarding locked and crossed markets before the open 
to the period prior to the close; (2) require market makers and ECNs 
that send a Trade-or-Move Message to do so at least 15 seconds before 
entering a locking or crossing quote rather than after entering a 
locking or crossing quote, as the rule currently requires; (3) increase 
from 5,000 to 10,000 the minimum number of shares that must accompany a 
non-agency Trade-or-Move Message; and (4) reduce the amount of time 
within which the recipient of a Trade-or-Move Message must properly 
respond to the message from 30 seconds to 15 seconds.
    The Commission received seven comment letters regarding the 
original proposal, as amended by Amendment No. 1.\12\ In response to 
the commenters, Nasdaq filed Amendment No. 2 to the proposal, which 
made several changes to the original proposal to address concerns 
raised by the commenters. The proposal, as amended by Amendment No. 2, 
will: (1) Require ECNs to send Trade-or-Move Messages prior to entering 
locking or crossing quotes and require market makers to send Trade-or-
Move Messages after entering locking or crossing quotes; (2) reduce the 
time to respond to a Trade-or-Move Message to 10 seconds; (3) provide a 
10,000-share minimum share requirement for Trade-or-Move Messages for 
Nasdaq 100 Index (``Nasdaq 100'') and S&P 400 Index (``S&P 400'') 
issues; (4) prohibit all market participants from entering locking or 
crossing quotes between 9:29:30 a.m. and 9:29:59 a.m.; and (5) delete 
provisions in the original proposal imposing Trade-or-Move requirements 
between 3:50 p.m. and 4:00 p.m.\13\
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    \12\ See supra note 5.
    \13\ See Amendment No. 2, supra note 6.

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[[Page 38536]]

B. Nasdaq's Amended Proposal

1. Sequence of Messages
    In its original proposal, Nasdaq proposed to revise NASD Rule 
4613(e)(1)(C) to require all market participants to send Trade-or-Move 
Messages before, rather than after, entering a locking or crossing 
quotation. In response to concerns raised by commenters,\14\ Nasdaq 
revised its proposal to permit the sequence of Trade-or-Move Messages 
to differ by market participant business model. Specifically, under the 
amended proposal, ECNs will send a Trade-or-Move Message before 
entering a locking or crossing quote, and market makers will send a 
Trade-or-Move Message immediately after entering a locking or crossing 
quote.\15\ Nasdaq believes that the proposed change will permit ECNs to 
participate more effectively in the pre-opening period, while 
permitting market makers to retain their current automated systems.\16\ 
Nasdaq believes that the proposed change also will preserve the 
benefits that Nasdaq sought to achieve when it first implemented the 
Trade-or-Move requirements, including increased price discovery and 
decreased gamesmanship surrounding the occurrence and resolution of 
locked and crossed markets.\17\
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    \14\ See, e.g., Schwab Letter, supra note 5 (asserting that the 
proposal to require market makers to send a Trade-or-Move Message 
prior to entering a locking or crossing quote would necessitate 
manual, rather than automated processing; and NDB Letter, supra note 
5 (stating that the proposal to require market makers to send a 
Trade-or-Move Message prior to entering a locking or crossing quote 
would require substantial programming changes).
    \15\ ``Immediate'' issuance of a Trade-or-Move Message will be 
understood to mean instantaneous in the case of automated systems 
and not exceeding a different, specified period where manual 
processes are utilized.
    \16\ See Amendment No. 2, supra note 6.
    \17\ See Amendment No. 2, supra note 6.
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2. Response Time
    Under current NASD Rule 4613(e)(1)(C), the recipient of a Trade-or-
Move Message must respond properly to the message within 30 seconds. In 
the original proposal, Nasdaq proposed to reduce the response time to 
15 seconds to reduce the duration of locked and crossed markets that 
occur.
    Based upon commenters' concern that 15 seconds was too long a 
response time,\18\ Nasdaq proposed to reduce the time for responding to 
a Trade-or-Move Message to 10 seconds. Although Nasdaq acknowledges 
that this is a relatively brief period for non-automated participants, 
Nasdaq believes that firms that choose to participate in the pre-open 
must vigilantly monitor their quotes.\19\ In addition, as described 
more fully below, Nasdaq believes that the 10-second response time will 
help ECNs to avoid dual liability.\20\
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    \18\ See, e.g., Knight Letter and STA Letter, supra note 5.
    \19\ See Amendment No. 2, supra note 6.
    \20\ See Amendment No. 2, supra note 6.
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3. Number of Shares
    Under current NASD Rule 4613(e)(1)(C), the aggregate size of the 
Trade-or-Move Message must be at least 5,000 shares (i.e., the market 
participant must send a total of 5,000 shares to all parties it is 
locking or crossing) in the case of a proprietary quote, or the actual 
size of an agency order if that is the basis for the locking or 
crossing quote. Under the original proposal, Nasdaq sought to raise the 
minimum Trade-or-Move Message share requirement to 10,000 shares or the 
actual size of an agency order. Nasdaq believes that a market 
participant must be willing to risk significant capital and to trade a 
significant amount if it wishes to lock or cross the market during the 
ten minutes prior to the opening.
    In light of concerns raised regarding the 10,000-share 
requirement,\21\ Nasdaq revised the proposal to limit the 10,000-share 
Trade-or-Move Message requirement size to proprietary orders involving 
securities in the Nasdaq 100 Index and the S&P 400 Index. The minimum 
Trade-or-Move Message size requirement will remain at 5,000 shares for 
other issues. The ``agency exception'' contained in current NASD Rule 
4613(e)(1)(C) will continue to operate as it does today. Nasdaq 
believes that Nasdaq 100 and S&P 400 issues are marked by higher 
liquidity and faster trading and, therefore, merit a more stringent 
effort to avoid locked or crossed markets. Nasdaq believes that the 
10,000-share requirement proportionately increases the economic 
significance of entering a locking or crossing quotation for stocks 
that are widely followed and for which a locked or crossed market would 
have the greatest impact.
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    \21\ See, e.g., Knight Letter, supra note 5 (expressing concern 
that the 10,000-share requirement could require a firm to commit $1 
million to execute an order in certain stocks at a time when the 
market is not fully functional).
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4. Limited Prohibition on Entry of Locking and Crossing Quotes
    Based upon the recommendation of the Trade-or-Move Subcommittee 
(``Subcommittee'') of Nasdaq's Quality of Markets Committee, Nasdaq 
revised the proposal to prohibit market participants from entering a 
locking or crossing quote between 9:29:30 a.m. and 9:29:59 a.m.\22\ 
During that period, all market participants will be permitted to send 
Trade-or-Move Messages for the required number of shares to parties 
that they would lock or cross if permitted to enter such locking or 
crossing quotes. Market participants that receive Trade-or-Move 
Messages during that time period will be obligated to respond properly 
by trading in full or moving their quote within the appropriate 
response time.
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    \22\ Nasdaq formed the Subcommittee to respond to concerns 
raised by the initial seven commenters to the proposal. The 
Subcommittee was comprised of the initial seven commenters and 
members representing other constituencies within the Nasdaq market 
making community.
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    Nasdaq believes that a prohibition on the entry of locking and 
crossing quotes immediately prior to the market opening, in conjunction 
with the continued obligation to respond properly to Trade-or-Move 
Messages, will facilitate the resolution of locks and crosses that 
exist at 9:29:30 a.m. Further, Nasdaq believes that the potential 
benefits to all market participants of a more orderly opening outweigh 
the limited loss of price discovery that will result from suppressing 
locking and crossing quotes during that brief but critical period.
5. Pre-Closing
    Based upon the positive effect that the Trade-or-Move requirements 
have had on resolving potential locked and crossed markets at and 
immediately before the market opening, Nasdaq originally proposed to 
expand the application of NASD Rule 4613(e)(1)(C) to include the 10-
minute period preceding the market close (3:50 p.m. to 3:59:59 p.m.). 
The commenters generally opposed this provision of the original 
proposal. In light of the comments received and with the implementation 
of SuperSOES, Nasdaq revised the proposal to eliminate the provisions 
expanding the application of NASD Rule 4613(e)(1)(C) to the period 
prior to the closing.

III. Summary of Comments and Nasdaq's Response

A. Comments to the Original Proposal and Amendment No. 1

    As noted above, the Commission received seven comment letters 
regarding the original proposal, as amended by Amendment No. 1.\23\ In 
response to the commenters, Nasdaq filed Amendment No. 2 to the 
proposal, which made several changes to the original proposal to 
address concerns raised by the commenters. In addition, Nasdaq filed 
Amendment No. 3 to the

[[Page 38537]]

proposal, which responded to the concerns of one commenter and 
corrected a misstatement in Amendment No. 2.\24\ Amendment Nos. 2 and 3 
were published for comment in the March 11 Release.\25\ The comments 
raised by the seven commenters to the original proposal, and Nasdaq's 
response to the commenters, are discussed in detail in the March 11 
Release.
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    \23\ See supra note 5.
    \24\ See supra note 7.
    \25\ See supra note 8.
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B. Comments Regarding Amendment Nos. 2 and 3 and Nasdaq's Response

    The Commission received three comment letters regarding Amendment 
Nos. 2 and 3.\26\ One commenter suggested that Nasdaq replace the 
Trade-or-Move requirements with a requirement that market participants 
enter firm quotes prior to the market open.\27\
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    \26\ See supra note 9.
    \27\ See Levine Letter, supra note 9.
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    In its response, Nasdaq stated that the Subcommittee considered the 
commenter's suggested approach twice in 2001.\28\ Nasdaq believes, 
however, that the commenter's suggested approach would either shift 
occurrences of locked and crossed markets to an earlier time period or 
eliminate a beneficial pre-opening opportunity. In this regard, Nasdaq 
states that it is important for market participants to use Nasdaq 
systems to gather information, adjust their quotations, and prepare for 
the market open before the market opens. Nasdaq believes that revising 
the Trade-or-Move requirements provides the best method for improving 
the quality of the market open.\29\
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    \28\ See April 5 Letter, supra note 10.
    \29\ See April 5 Letter, supra note 10.
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    Another commenter stated that, although it generally supports 
Nasdaq's efforts to improve the Nasdaq opening, it believes that 
Nasdaq's amended proposal falls short of solving concerns surrounding 
the market open.\30\ The commenter suggested that the most effective 
way to improve the market open is to require that the first official 
print in a Nasdaq stock be based upon the first unlocked and uncrossed 
market, thereby reflecting the true market price of the security.\31\ 
In addition, the commenter stated that to provide more effective 
deterrence, firms that do fail to comply with Nasdaq's requirements for 
locked and crossed markets during the pre-opening should be taken ``out 
of the box'' and not allowed to quote for a specified period of 
time.\32\ Finally, the commenter recommended that all market 
participants be required to send a Trade-or-Move Message prior to 
locking or crossing the market.
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    \30\ See Morgan Stanley Letter, supra note 9.
    \31\ Id.
    \32\ Id.
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    Similarly, another commenter stated that the different Trade-or-
Move Message sequence requirements for market makers and ECNs would 
lead to confusion.\33\ The commenter stated that all market 
participants should be required to enter locking or crossing quotes 
either before or after sending a Trade-or-Move Message; however, the 
commenter preferred the former sequence.\34\ The commenter also 
recommended that the Trade-or-Move requirements mandate that market 
participants take continuous action to resolve locked and crossed 
markets, either by moving the locking or crossing quote after receiving 
an execution or by sending another Trade-or-Move Message to trade for 
additional shares at the quoted price.
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    \33\ See First Union Letter, supra note 9.
    \34\ Id.
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    In response to the concerns regarding the different Trade-or-Move 
Message sequences for market makers and ECNs, Nasdaq states that, after 
carefully examining the issue, it has concluded that the proposed 
message sequences will reduce the instances of locked and crossed 
markets.\35\ With regard to the concern that the current Trade-or-Move 
requirements do not require ongoing efforts to resolve locked and 
crossed markets, Nasdaq states that it expects to file a proposal with 
the Commission that will further improve the operation of the Trade-or-
Move requirements and address both First Union's concern regarding the 
efficacy of the Trade-or-Move requirements and Morgan Stanley's 
suggestion that the quote requirements of a market participant that 
violates the Trade-or-Move requirements be removed from the market for 
a period of time.\36\
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    \35\ See April 15 Letter, supra note 11.
    \36\ See April 15 Letter, supra note 11. Nasdaq notes that its 
Quality of Market Committee and the Subcommittee considered a 
proposal to remove the quotations of a market participant that 
violated the Trade-or-Move requirements. However, Nasdaq states that 
it was unable to develop a solution that would effectively preserve 
the rights of market participants that had their quotes removed from 
the market involuntarily. See April 15 Letter, supra note 11.
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    Finally, with respect to Morgan Stanley's suggestion that the first 
official print in a Nasdaq stock be based on the first unlocked and 
uncrossed market, Nasdaq states that it is considering a proposal to 
establish an official opening print price that accounts for Nasdaq's 
decentralized market structure.\37\ Before implementing an opening 
print process, Nasdaq will solicit input from its Quality of Markets 
Committee, its Board of Directors, and its members.\38\
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    \37\ See April 15 Letter, supra note 11.
    \38\ See April 15 Letter, supra note 11.
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IV. Discussion

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities association.\39\ In particular, the Commission finds that 
the proposal, as amended, is consistent with Sections 15A(b)(6), 
15(b)(11), and 11A(a)(1)(C) of the Act.\40\ Section 15A(b)(6) of the 
Act requires that the rules of a national securities association be 
designed to promote just and equitable principles of trade, foster 
cooperation and coordination with persons engaged in processing 
information with respect to and facilitating transactions in 
securities, as well as to remove impediments to and perfect the 
mechanism of a free and open market, and, in general, to protect 
investors and the public interest. Section 15(b)(11) of the Act 
requires that the rules of a national securities association be 
designed to produce fair and informative quotations, prevent fictitious 
or misleading quotations, and to promote orderly procedures for 
collecting, distributing, and publishing quotations. In Section 
11A(a)(1)(C) of the Act, Congress found that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure: (1) Economically 
efficient execution of securities transactions; (2) fair competition 
among brokers and dealers; (3) the availability to brokers, dealers and 
investors of information with respect to quotations and transactions in 
securities; (4) the practicability of brokers executing investors 
orders in the best market; and (5) an opportunity for investors orders 
to be executed without the participation of a dealer.
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    \39\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \40\ 15 U.S.C. 78o-3(b)(6), 15 U.S.C. 78o-3(b)(11), and 15 
U.S.C. 78k-1(a)(1)(C).
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    Specifically, the Commission finds that Nasdaq's proposal, as 
amended, is designed to reduce the frequency of pre-opening locked and 
crossed markets, which should help to provide more informative 
quotation information, facilitate price discovery, and contribute to 
the maintenance of a fair and orderly market. The Commission believes 
that the proposal, as amended, addresses the concerns raised by the 
commenters

[[Page 38538]]

while providing requirements designed to establish a more orderly 
market opening.
    For example, under the revised Trade-or-Move Message sequence 
procedures, ECNs will send a Trade-or-Move Message prior to entering a 
locking or crossing quote, while market makers will send a Trade-or-
Move Message after entering a locking or crossing quote. The revised 
procedures respond to market makers' concerns that requiring market 
makers to send a Trade-or-Move Message prior to entering a locking or 
crossing quote would necessitate substantial programming changes or 
require manual processing.\41\ At the same time, the Trade-or-Move 
Message sequence applicable to ECNs, combined with the requirement to 
respond to a Trade-or-Move Message within 10 seconds, should help ECNs 
avoid dual liability. Specifically, the revised rule will allow an ECN 
to send a Trade-or-Move Message for the actual size of an agency order, 
wait 10 seconds for a response, and, assuming it receives no response, 
cancel the Trade-or Move Message and enter the agency order as a 
locking or crossing quote.\42\ The Commission also believes that the 
requirement to respond to a Trade-or-Move Message within 10 seconds 
should help to facilitate the prompt resolution of locked or crossed 
markets that occur.
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    \41\ See, e.g., NDB Letter and Schwab Letter, supra note 5.
    \42\ See Amendment No. 2, supra note 6.
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    The amended proposal will require a market participant handling a 
proprietary order to send a Trade-or-Move Message for a minimum of 
10,000 shares in the case of Nasdaq 100 and S&P 400 issues and 5,000 
shares for all other issues. The Commission believes that the 10,000-
share Trade-or-Move Message size requirement may help to deter market 
participants entering from locking or crossing quotes in Nasdaq 100 and 
S&P 400 issues.
    As discussed above, Nasdaq's amended proposal prohibits market 
participants from locking or crossing the market between 9:29:30 a.m. 
and 9:29:59 a.m. Market participants will, however, be permitted to 
send Trade-or-Move Messages for the required number of shares to any 
party or parties they wish to lock or cross. The recipients of such 
messages must respond to the message by trading in full or moving their 
quotes within the 10-second response time. The Commission believes that 
the prohibition on locking and crossing the market between 9:29:30 a.m. 
and 9:29:59 a.m. could help to provide for a more orderly market open, 
and thereby benefit all market participants.
    Finally, the three comment letters received following the 
publication of Amendment Nos. 2 and 3 reflect the continuing 
disagreement among market participants concerning the implementation of 
the Trade-or-Move requirements and the most effective means for 
providing an orderly opening on Nasdaq. In its response to the 
commenters, Nasdaq noted that it is developing proposals designed to 
address some of the concerns raised by the commenters.\43\ The 
Commission expects Nasdaq to continue working to refine its procedures 
as necessary to achieve a more orderly market opening.
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    \43\ See April 15 Letter, supra note 11.
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V. Conclusion

    For the foregoing reasons, the Commission finds that the proposal, 
as amended, is consistent with the requirements of the Act and rules 
and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\44\ that the proposed rule change (SR-NASD-00-76), as amended, is 
approved.
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    \44\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\45\
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    \45\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland
Deputy Secretary
[FR Doc. 02-13873 Filed 6-3-02; 8:45 am]
BILLING CODE 8010-01-P