[Federal Register Volume 67, Number 196 (Wednesday, October 9, 2002)]
[Notices]
[Pages 63001-63003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25673]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46589; File No. SR-NASD-2002-130]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by National 
Association of Securities Dealers, Inc. Relating to an Extension of the 
Nasdaq International Service Pilot Program

October 2, 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 September 26, 2002, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by Nasdaq. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons. For the reasons described below, the 
Commission is granting accelerated approval to the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD proposes to extend for one year: (1) The pilot term of the 
Nasdaq International Service (``Service''); and (2) the effectiveness 
of certain rules (``International Rules'') that are unique to the 
Service. This rule change does not

[[Page 63002]]

entail any modification of the International Rules. The present 
authorization for the Service and the International Rules expires on 
October 9, 2002. With this filing, the pilot period for the Service and 
the International Rules would be extended until October 9, 2003.

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

    In its filing with the Commission, NASD included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. NASD 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
    The NASD proposes to extend for an additional year, until October 
9, 2003, the pilot operation of the Service and the effectiveness of 
the International Rules governing broker-dealers' access to and use of 
the Service. The Commission originally approved the existing pilot 
operation of the Service and the International Rules in October 
1991.\3\ The Service was launched on January 20, 1992. The pilot has 
since been extended and is currently set to expire on October 9, 
2002.\4\
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    \3\ See Securities Exchange Act Release No. 29812 (October 11, 
1991), 56 FR 52082 (October 17, 1991) (File No. SR-NASD-90-33).
    \4\ See Securities Exchange Act Release No. 44915 (Oct. 9, 
2001), 66 FR 52650 (Oct. 16, 2001) (File No. SR-NASD-01-65).
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    The Service supports an early trading session running from 3:30 
a.m. to 9 a.m. E.T. on each U.S. business day (``European Session'') 
that overlaps the business hours of the London financial markets. 
Participation in the Service is voluntary and is open to any authorized 
NASD member firm or its approved broker-dealer affiliate in the U.K. A 
member participates as a Service market maker either by staffing its 
trading facilities in the U.S. or the facilities of its approved 
affiliate during the European Session. The Service also has a variable 
opening feature that permits Service market makers to elect to 
participate starting from 3:30 a.m., 5:30 a.m. or 7:30 a.m., Eastern 
Time. The election is required to be made on a security-by-security 
basis at the time a firm registers with the NASD as a Service market 
maker.\5\ At present, there are no Service market makers participating 
in the Service.
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    \5\ Regardless of the opening time chosen by the Service market 
maker, the Service market maker is required to fulfill all the 
obligations of a Service market maker from that time (i.e., either 
3:30 a.m., 5:30 a.m. or 7:30 a.m.) until the European Session closes 
at 9 a.m., Eastern Time. See Securities Exchange Act Release No. 
32471 (June 16, 1993), 58 FR 33965 (June 22, 1993) (File No. SR-
NASD-92-54).
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    As noted above, the NASD is seeking to extend the pilot term for 
one year. During this period, the NASD will continue to reevaluate the 
Service's operation and consider possible enhancements to the Service 
to broaden market-maker participation. The NASD continues to view the 
Service as a significant experiment in expanding potential 
opportunities for international trading via systems operated by Nasdaq. 
Accordingly, the NASD believes that this pilot operation warrants an 
extension to permit possible enhancements that will increase the 
Service's utility and attractiveness to the investment community. The 
NASD maintains its belief that it is extremely important to preserve 
this facility and the opportunities it provides, especially in light of 
the increasingly global nature of the securities markets and the trend 
of cross-border transactions generally.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of sections 11A(a)(1)(B) and (C) and 15A(b)(6) of the 
Act.\6\ Subsections (B) and (C) of section 11A(a)(1) set forth the 
Congressional goals of achieving more efficient and effective market 
operations, broader availability of information with respect to 
quotations for securities, and the execution of investor orders in the 
best market through the use of advanced data processing and 
communications techniques. Section 15A(b)(6) requires, among other 
things, that the NASD rules be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principals of trade, and to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities. The NASD believes that the proposed extension of the 
Service and the International Rules is fully consistent with these 
statutory provisions.
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    \6\ 15 U.S.C. 78k-1(a)(1)(B), (C); 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD 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. 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. SR-NASD-2002-130 and 
should be submitted by October 30, 2002.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with sections 11A(a)(1)(B) and (C) and 15A(b)(6) of the Act.\7\ The 
Commission believes that, in connection with the globalization of 
securities markets, the Service provides an opportunity to advance the 
statutory goals of (1) achieving more efficient and effective market 
operations; (2) broader availability of information with respect to 
quotations for securities; (3) the execution of investor orders in the 
best market through the use of advanced data processing and 
communications techniques; and (4) fostering cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing, information with

[[Page 63003]]

respect to, and facilitating transactions in securities.
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    \7\ 15 U.S.C. 78k-1(a)(1)(B), (C); 78o-3(b)(6). In reviewing 
this proposal, the Commission has considered its potential impact on 
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
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    The Commission views the Service as providing potential 
opportunities for international trading via a system operated by 
Nasdaq. The Service is intended to promote additional commitments of 
member firms' capital to market making and to attract commitments from 
firms based in Europe that currently do not function as Nasdaq market 
makers. Although there are no Service market makers participating in 
the Service, the NASD plans to reevaluate the Service's operation and 
consider possible enhancements to the Service to broaden market maker 
participation. Accordingly, the Commission believes that this pilot 
operation warrants an extension to permit possible enhancements that 
will increase the Service's utility and attractiveness to the 
investment community. Any changes to the operation of the Service will 
be filed pursuant to section 19(b)(2) of the Act.\8\
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    \8\ 15 U.S.C. 78s(b)(2).
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    Pursuant to Section 19(b)(2) of the Act,\9\ the Commission finds 
good cause for approving the proposed rule change prior to the 
thirtieth day after the date of publication of notice of filing thereof 
in the Federal Register. The Commission believes that it is appropriate 
to approve on an accelerated basis the one-year extension of the 
Service, until October 9, 2003, to ensure the continuous operation of 
the Service, which is otherwise set to expire on October 9, 2002.
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    \9\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NASD-2002-130) is hereby 
approved on an accelerated basis.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-25673 Filed 10-8-02; 8:45 am]
BILLING CODE 8010-01-P