[Federal Register Volume 67, Number 231 (Monday, December 2, 2002)]
[Notices]
[Pages 71599-71600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30370]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46885; File No. SR-NASD-2002-142]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Granting Approval to a Proposed Rule Change and 
Amendment No. 1 Thereto To Establish an Execution Price Governor in 
SuperMontage

November 22, 2002.
    On October 9, 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''), 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 establish in SuperMontage a permanent execution 
price governor to prevent inadvertent executions significantly away 
from the inside market. The NASD amended its proposals on October 10, 
2002.\3\ The proposed rule change, as amended, was published for 
comment in the Federal Register on October 21, 2002.\4\ The Commission 
received no comments on the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Thomas P. Moran, Associate General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated October 10, 2002 
(``Amendment No. 1'').
    \4\ See Securities Exchange Act Release No. 46650 (October 11, 
2002), 67 FR 64683.
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    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of Section 15A of the Act \5\ and the 
rules and regulations thereunder.\6\ Specifically, the Commission finds 
that the proposed rule change, as amended, is consistent with Section 
15(A)(b)(6),\7\ which provides that the rules of the association be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principals of trade, to foster cooperation

[[Page 71600]]

and coordination with person engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating 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. The Commission believes that 
the establishment of a SuperMontage execution price governor may 
prevent inadvertent executions significantly away from the inside 
market. The Commission also agrees with Nasdaq that this approach may 
act to balance the goals of rapid execution and price discovery while 
protecting market participants and the public investors they represent 
from excessive volatility and market confusion that can result from 
grossly mispriced/sized quotes/orders in an automated and linked 
trading environment. The Commission also notes that Nasdaq separately 
filed and received accelerated approval of a proposal, pursuant to 
Section 19(b)(2) of the Act,\8\ to establish the execution price 
governor on a 60-day pilot basis, which is scheduled to expire on 
December 13, 2002.\9\ Since the implementation of the pilot program, 
Nasdaq has indicated that it has encountered no problems with the 
establishment of the execution price governor.\10\
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    \5\ 15 U.S.C. 78o-3.
    \6\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78o-3(b)(6).
    \8\ 15 U.S.C. 78s(b)(2).
    \9\ See Securities Exchange Act Release No. 46652 (October 11, 
2002), 67 FR 64681 (October 21, 2002).
    \10\ Telephone conversation between Thomas P. Moran, Associate 
General Counsel, Nasdaq, and Cyndi Nguyen, Attorney, Division, 
Commission, on November 21, 2002.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change, 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,\11\ that the proposed rule change and Amendment No. 1 (SR-NASD-
2002-142) are approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-30370 Filed 11-29-02; 8:45 am]
BILLING CODE 8010-01-P