[Federal Register Volume 67, Number 247 (Tuesday, December 24, 2002)]
[Notices]
[Pages 78540-78543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32317]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47009; File No. SR-NASD-2002-175]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 Thereto by the National Association of Securities Dealers, Inc. 
Relating to the Listing and Trading of Market Recovery Notes Linked to 
the Nasdaq-100 Index

December 16, 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 December 10, 2002, 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 (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I, and II, below, which Items have been prepared by 
Nasdaq. On December 13, 2002, the NASD filed Amendment No. 1 to the 
proposed rule change.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons and is approving the proposal, as amended, on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter John D. Nachmann, Senior Attorney, Nasdaq to 
Kathleen A. England, Assistant Director, Division of Market 
Regulation (``Division''), Commission, dated December 12, 2002 
(``Amendment No. 1''). Amendment No. 1 provides for certain 
technical changes and clarification to the original proposal.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to list and trade Market Recovery Notes Linked to 
the Nasdaq-100 Index (the ``Notes'') issued by Merrill Lynch & Co., 
Inc. (``Merrill Lynch'').

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 III 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
    Under NASD Rule 4420(f), the Nasdaq may approve for listing and 
trading innovative securities which cannot be readily categorized under 
traditional listing guidelines.\4\ Nasdaq proposes to list for trading 
the Notes, as described below, under NASD Rule 4420(f).
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    \4\ See Securities Exchange Act Release No. 32988 (September 29, 
1993), 58 FR 52124 (October 6, 1993) (order approving File No. SR-
NASD-93-15), (``1993 Order'').
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Description of the Notes

    The Notes are a series of senior non-convertible debt securities 
that will be issued by Merrill Lynch and will not be secured by 
collateral. The Notes will have a term of not less than two and not 
more than four years. The Notes will be issued in denominations of 
whole units (``Unit''), with each Unit representing a single Note. The 
original public offering price will be $10 per Unit. The Notes will not 
pay interest and are not subject to redemption by Merrill Lynch or at 
the option of any beneficial owner before maturity in 2005.\5\
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    \5\ The actual maturity date will be determined on the day the 
Notes are priced for initial sale to the public.
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    At maturity, if the value of the Nasdaq-100 Index \6\ has 
increased, a beneficial owner will be entitled to receive a payment on 
the Notes based on triple the amount of that percentage increase, not 
to exceed a maximum payment per Unit (the ``Capped Value'') that is 
expected to be between $11 and $16.\7\ Thus, the Notes provide 
investors the opportunity to obtain leveraged returns based on the 
Nasdaq-100 Index.

[[Page 78541]]

Unlike ordinary debt securities, the Notes do not guarantee any return 
of principal at maturity. Therefore, if the value of the Nasdaq-100 
Index has declined at maturity, a beneficial owner will receive less, 
and possibly significantly less, than the original public offering 
price of $10 per Unit.
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    \6\ The Nasdaq-100 Index is a modified capitalization-weighted 
index of 100 of the largest non-financial companies listed on The 
Nasdaq National Market tier of Nasdaq. The Index constitutes a 
broadly diversified segment of the largest securities listed on The 
Nasdaq Stock Market and includes companies across a variety of major 
industry groups. The securities in the Index must, among other 
things, have an average daily trading volume on Nasdaq of at least 
National Market. In order to initially be included in the Nasdaq 
National Market, an issuer must meet a number of financial criteria, 
including a minimum of: (1) 1.1 million publicly held shares; (2) $8 
million in market value of publicly held shares; (3) shareholder's 
equity of 15 million, or market value of listetd securities of $75 
million or total assets and total revenue of $75 million; and (4) a 
bid price of $1. An issuer may be required to meet higher listing 
standards depending on the Entry or maintenance Standard under which 
it qualifies for inclusion in The Nasdaq National Market. See 
Amendment No. 1, supra note 3.
    No one particular stock or group of stocks dominates the Nasdaq-
100 Index. Id. As of December 9, 2002, the largest component 
security presented 13.13% of the Index and the five largest 
component securities represented 31.9% of the Index. Id. In order to 
limit domination of the Index by a few large stock stocks, the Index 
is calculated under a ``modified capitalization-weighted'' 
methodology, which is a hybrid between equal weighting and 
conventional capitalization weighting. Under the methodology 
employed, on a quarterly basis coinciding with Nasdaq's quarterly 
scheduled weight adjustment procedures, the Index Securities are 
categorized as either ``Large Stocks'' or ``Small Stocks'' depending 
on whether their current percentage weights (after taking into 
acocunt such scheduled weight adjustments due to stock repurchases, 
secondary offerings, or other corporate actions) are greater than, 
or less than or equal to, the average percentage weight in the Index 
(i.e., as a 100-stock index, the average percentage weight in the 
Index is 1.0%). Such quarterly examination will result in an Index 
rebalancing if either one or both of the following two weight 
distribution requirements are not met: (1) The current weight of the 
single largest market capitalization Index component security must 
be less than or equal to 24.0%, and (2) the ``collective weight'' of 
those Index component securities whose individual current weights 
are in excess of 4.5%, when added together, must be less than or 
equal to 48.0%. Index securities are ranked by market value and are 
evaluated annually to determine which securities will be included in 
th e Index. Moreover, if at any time during the yeaer an Index 
security is no longer trading on the Nasdaq Stock Market, or is 
otherwise determined by Nasdaq to become ineligible for continued 
inclusion in the Index, the security will be replaced with the 
largest market capitalization security not currently in the Index 
that meets the Index eligibility criteria. For a detailed 
description of the Nasdaq-100 Index, see the prospectus supplement 
that will be filed by Merrill Lynch with the Commission prior to the 
issuance of the Notes.
    \7\ The actual Capped Value will be determined at the time of 
issuance of the Notes.
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    The payment that a beneficial owner will be entitled to receive 
(the ``Redemption Amount'') depends entirely on the relation of the 
average of the values of the Nasdaq-100 Index at the close of the 
market on five business days shortly before the maturity of the Notes 
(the ``Ending Value'') and the closing value of the Nasdaq-100 Index on 
the date the Notes are priced for initial sale to the public (the 
``Starting Value'').
    If the Ending Value is less than or equal to the Starting Value, 
the Redemption Amount per Unit will equal:
[GRAPHIC] [TIFF OMITTED] TN24DE02.030

    If the Ending Value is greater than the Starting Value, the 
Redemption Amount per Unit will equal:
[GRAPHIC] [TIFF OMITTED] TN24DE02.031

provided, however, the Redemption Amount cannot exceed the Capped 
Value.

    The Notes are cash-settled in U.S. dollars and do not give the 
holder any right to receive a portfolio security, dividend payments or 
any other ownership right or interest in the portfolio or index of 
securities comprising the Nasdaq-100 Index. The Notes are designed for 
investors who want to participate or gain exposure to the Nasdaq-100 
Index, subject to a cap, and who are willing to forego market interest 
payments on the Notes during such term. The Commission has previously 
approved the listing of options on, and securities the performance of 
which have been linked to or based on, the Nasdaq-100 Index.\8\
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    \8\ See Securities Exchange Act Release Nos. 33428 (January 5, 
1994), 59 FR 1576 (January 11, 1994) (approving the listing and 
trading of options on the Nasday-100 Index); 43000 (June 30, 2000), 
65 FR 42409 (July 10, 2000) (approving the listing and trading of 
options based upon one-tenth of the value of the Nasdaqq-100 Index); 
41119 (February 26, 1999), 64 FR 11510 (March 9, 1999) (approving 
the listing and trading of Portfolio Depositary Receipts based on 
the Nasdaq-100 Index).
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    As of November 30, 2002, the adjusted market capitalization of the 
securities included in the Nasdaq-100 Index ranged from a high of 
$200.6 billion to a low of $1.2 billion. The average daily trading 
volume for these same securities for the last eleven months, as of the 
same date, ranged from a high of 79.9 million shares to a low of 
634,118 shares.\9\
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    \9\ See Amendment No. 1, supra note 3.
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    The Nasdaq-100 Index is determined, composed, and calculated by 
Nasdaq. The value of the Nasdaq-100 Index is disseminated every 15 
seconds over the Nasdaq Trade Dissemination System.\10\
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    \10\ Id.
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Criteria for Initial and Continued Listing

    The Notes will initially be subject to Nasdaq's listing criteria 
for other securities under NASD Rule 4420(f). Specifically, under NASD 
Rule 4420(f)(1):
    (A) The issuer shall have assets in excess of $100 million and 
stockholders' equity of at least $10 million. In the case of an issuer 
which is unable to satisfy the income criteria set forth in paragraph 
(a)(1), Nasdaq generally will require the issuer to have the following: 
(i) Assets in excess of $200 million and stockholders' equity of at 
least $10 million; or (ii) assets in excess of $100 million and 
stockholders' equity of at least $20 million;
    (B) There must be a minimum of 400 holders of the security, 
provided, however, that if the instrument is traded in $1,000 
denominations, there must be a minimum of 100 holders;
    (C) For equity securities designated pursuant to this paragraph, 
there must be a minimum public distribution of 1,000,000 trading units;
    (D) The aggregate market value/principal amount of the security 
will be at least $4 million.
    In addition, Nasdaq notes that Merrill Lynch satisfies the listed 
marketplace requirement set forth in NASD Rule 4420(f)(2).\11\ Lastly, 
pursuant to NASD Rule 4420(f)(3), prior to the commencement of trading 
of the Notes, Nasdaq will distribute a circular to the membership 
providing guidance regarding member firm compliance responsibilities 
and requirements, including suitability recommendations, and 
highlighting the special risks and characteristics of the Notes. In 
particular, Nasdaq will advise members recommending a transaction in 
the Notes to: (1) Determine that such transaction is suitable for the 
customer; and (2) have a reasonable basis for believing that the 
customer can evaluate the special characteristics of, and is able to 
bear the financial risks of, such transaction.
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    \11\ NASD Rule 4420(f)(2) generally requires that issuers of 
securities designated pursuant to NASD Rule 4420(e) be listed on 
Nasdaq or the New York Stock Exchange (``NYSE'') or be an affiliate 
of a company listed on Nasqad or the NYSE; provided, however, that 
the provisions of NASD Rule 4450 will be applied to sovereign 
issuers of ``other'' securities on a case-by-case basis.
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    The Notes will be subject to Nasdaq's continued listing criteria 
for other securities pursuant to NASD Rule 4450(c), which requires that 
the aggregate market value or principal amount of publicly-held units 
must be at least $1 million. Nasdaq will also consider prohibiting the 
continued listing of the Notes if Merrill Lynch is not able to meet its 
obligations on the Notes.\12\ The Notes also must have at least two 
registered and active market makers as required by NASD Rule 
4450(a)(6).
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    \12\ See Amendment No. 1, supra note 3.
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    The Notes will be registered under Section 12 of the Act.

Rules Applicable to the Trading of the Notes

    Since the Notes will be deemed equity securities for the purpose of 
NASD Rule 4420(f), the NASD and Nasdaq's existing equity trading rules 
will apply to the Notes. First, pursuant to NASD Rule 2310, 
``Recommendations to Customers (Suitability),'' and NASD-IM-2310-2, 
``Fair Dealing with Customers,'' NASD members must have reasonable 
grounds for believing that a recommendation to a customer regarding the 
purchase, sale or exchange of any security is suitable for such 
customer upon the basis of the facts, if any, disclosed by such 
customer as to his other security holdings and as to his financial 
situation and needs.\13\ In addition, as previously mentioned, Nasdaq 
will distribute a circular to advise members and employees thereof

[[Page 78542]]

recommending a transaction in the Notes to, among other things, have a 
reasonable basis for believing that the customer can evaluate the 
special characteristics of, and is able to bear the financial risks of, 
such transaction. Second, the Notes will be subject to the equity 
margin rules. Third, the regular equity trading hours of 9:30 a.m. to 4 
p.m. will apply to transactions in the Notes.
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    \13\ NASD Rule 2310(b) requires members to make reasonable 
efforts to obtain information concerning a customer's financial 
status, a customer's tax status, a customer's investment objectives, 
and such other information used or considered to be reasonable by 
such member or registered representative in making recommendations 
to the customer.
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    Nasdaq represents that NASD's surveillance procedures are adequate 
to properly monitor the trading of the Notes. Specifically, NASD will 
rely on its current surveillance procedures governing equity 
securities, and will include additional monitoring on key pricing 
dates. In addition, Nasdaq has a general policy that prohibits the 
distribution of material, non-public information by its employees.

Disclosure and Dissemination of Information

    Merrill Lynch will deliver a prospectus in connection with the 
initial purchase of the Notes. The procedure for the delivery of a 
prospectus will be the same as Merrill Lynch's current procedure 
involving primary offerings. In addition, Nasdaq will issue a circular 
to NASD members explaining the unique characteristics and risks of the 
Notes.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
Section 15A of the Act,\14\ in general, and with Section 15A(b)(6) of 
the Act,\15\ in particular, in that the proposal is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and, in general, to protect 
investors and the public interest.
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    \14\ 15 U.S.C. 78o-3.
    \15\ 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, as amended, 
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, as amended, 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 
number SR-NASD-2002-175 and should be submitted by January 14, 2003.

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

    Nasdaq has asked the Commission to approve the proposal, as 
amended, on an accelerated basis to accommodate the timetable for 
listing the Notes. The Commission notes that it has previously approved 
the listing and trading of similar Enhanced Return Notes linked to the 
Nasdaq-100 Index.\16\
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    \16\ See Securities Act Release Nos. 45024 (November 5, 2001), 
66 FR 56872 (November 13, 2001); 45429 (February 11, 2002), 67 FR 
7438 (February 19, 2002).
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    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder, applicable to a national securities 
association, and, in particular, with the requirements of Section 
15A(b)(6) of the Act \17\ in that it is designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market, and, in general, to protect 
investors and the public interest.\18\ The Commission believes that the 
Notes will provide investors with a means to participate in any 
percentage increase in the Index that exist at the maturity of the 
Notes, subject to the Capped Value. Specifically, as described more 
fully above, if the value of the Nasdaq-100 Index has increased, a 
beneficial owner will be entitled to receive at maturity a payment on 
the Notes based on triple the amount of any percentage increase in the 
Index, not to exceed the Capped Value.
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    \17\ 15 U.S.C 78o-3(b)(6).
    \18\ In approving the proposed rule, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
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    The Notes are leveraged debts instruments whose price will be 
derived from and based upon the value of the Index. In addition, as 
discussed more fully above, the Notes do not guarantee any return of 
principal at maturity. Thus, if the Index has declined at maturity, a 
beneficial owner may receive significantly less than the original 
public offering price of the Notes. Accordingly, the level of risk 
involved in the purchase or sale of the Notes is similar to the risk 
involved in the purchase or sale of traditional common stock. Because 
the final rate of return on the Notes is derivatively priced and based 
upon the performance of an index of securities, because the Notes are 
debt instruments that do not guarantee a return of principal, and 
because investors' potential return is limited by the Capped Value, 
there are several issues regarding trading of this type of product. For 
the reasons discussed below, the Commission believes that Nasdaq's 
proposal adequately addresses the concerns raised by this type of 
product.
    First, the Commission notes that the protections of NASD Rule 
4420(f) were designed to address the concerns attendant to the trading 
of hybrid securities like the Notes.\19\ In particular, by imposing the 
hybrid listing standards, heightened suitability for 
recommendations,\20\ and compliance requirements, noted above, the 
Commission believes that Nasdaq has adequately addressed the potential 
problems that could arise from the hybrid nature of the Notes. The 
Commission notes that Nasdaq will distribute a circular to its 
membership that provides guidance regarding member firm compliance 
responsibilities and requirements, including suitability 
recommendations, and highlights the special risks and characteristics 
associated with the Notes. Specifically, among other things, the 
circular will indicate that the Notes do not guarantee any return of 
principal

[[Page 78543]]

at maturity, that the maximum return on the Notes is limited to $11 and 
$16 per unit,\21\ that the Notes will not pay interest, and that the 
Notes will provide full exposure to any downside movement in the Index. 
Distribution of the circular should help to ensure that only customers 
with an understanding of the risks attendant to the trading of the 
Notes and who are able to bear the financial risks associated with 
transactions in the Notes will trade the Notes. In addition, the 
Commission notes that Merrill Lynch will deliver a prospectus in 
connection with the initial purchase of the Notes.
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    \19\ See 1993 Order, supra note 4.
    \20\ As discussed above, Nasdaq will advise members recommending 
a transaction in the Notes to: (1) Determine that the transaction is 
suitable for the customer; and (2) have a reasonable basis for 
believing that the customer can evaluate the special characteristics 
of, and is able to bear the financial risks of, the transaction.
    \21\ The actual Capped Value will be determined at the time of 
issuance of the Notes.
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    Second, the Commission notes that the final rate of return on the 
Notes depends, in part, upon the individual credit of the issuer, 
Merrill Lynch. To some extent this credit risk is minimized by the 
NASD's listing standards in NASD Rule 4420(f), which provide that only 
issuers satisfying substantial asset and equity requirements may issue 
these types of hybrid securities. In addition, the NASD's hybrid 
listing standards further require that the Notes have at least $4 
million in market value. Financial information regarding Merrill Lynch, 
in addition to information concerning the issuers of the securities 
comprising the Index, will be publicly available.\22\
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    \22\ The companies comprising the Index are reporting companies 
under the Act.
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    Third, the Notes will be registered under Section 12 of the Act. As 
noted above, the NASD's and Nasdaq's existing equity trading rules will 
apply to the Notes, which will be subject to equity margin rules and 
will trade during the regular equity trading hours of 9:30 a.m. to 4 
p.m. NASD Regulation's surveillance procedures for the Notes will be 
the same as its current surveillance procedures for equity securities, 
and will include additional monitoring on key pricing dates.
    Fourth, the Commission has a systemic concern that a broker-dealer, 
such as Merrill Lynch, or a subsidiary providing a hedge for the issuer 
will incur position exposure. However, as the Commission has concluded 
in previous approval orders for the hybrid instruments issued by 
broker-dealers, \23\ the Commission believes that this concern is 
minimal given the size of the Notes issuance in relation to the net 
worth of Merrill Lynch.
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    \23\ See, e.g., Securities Exchange Act Release Nos. 44913 
(October 9, 2001), 66 FR 52469 (October 15, 2001) (order approving 
File No. SR-NASD-2001-73) (approving the listing and trading of 
notes issued by Morgan Stanley Dean Witter & Co. whose return is 
based on the performance of the Index); 44483 (June 27, 2001), 66 FR 
35677 (July 6, 2001) (order approving File No. SR-Amex-2001-40) 
(approving the listing and trading of notes issued by Merrill Lynch 
whose return is based on a portfolio of 20 securities selected from 
the Amex Institutional Index); and 37744 (September 27, 1996), 61 FR 
52480 (October 7, 1996) (order approving File No. SR-Amex-96-27) 
(approving the listing and trading of notes issued by Merrill Lynch 
whose return is based on a weighted portfolio of healthcare/
biotechnology industry securities).
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    Finally, the Commission believes that the listing and trading of 
the proposed Notes should not unduly impact the market for the 
securities underlying the Index or raise manipulative concerns. In 
approving the product, the Commission recognizes that the Nasdaq-100 
Index is a modified capitalization-weighted index of 100 of the 
largest, non-financial companies listed on The Nasdaq National Market 
tier of Nasdaq. The Commission notes that the Index is determined, 
composed, and calculated by Nasdaq. As of November 30, 2002, the 
adjusted market capitalization of the securities included in the 
Nasdaq-100 Index ranged in capitalization from a high of $200.6 billion 
to a low of $1.2 billion. In addition, the average daily trading volume 
for the component stocks for the last eleven months, as of the same 
date, ranged from a high of 79.9 million shares to a low of 634, 118 
shares. Given the large capitalizations, liquid markets, and relative 
weightings of the Index's component stocks, the Commission continues to 
believe, as it has concluded previously, that the listing and trading 
of the Notes that are linked to the Nasdaq-100 Index, should not unduly 
impact the market for the underlying securities comprising the Nasdaq-
100 Index or raise manipulative concerns.\24\ As discussed more fully 
above, the Commission also believes that the weighting and potential 
quarterly rebalancing of the Nasdaq-100 Index should ensure that no one 
stock or group of stocks significantly minimize the potential for 
manipulation of the Index. Moreover, the issuers of the underlying 
securities comprising the Nasdaq-100 Index, are subject to reporting 
requirements under the Act, and all of the component stocks are either 
listed on Nasdaq or the NYSE or be an affiliate of a company listed on 
Nasdaq or the NYSE. In addition, Nasdaq's surveillance procedures 
should serve to deter as well as detect any potential manipulation. The 
Commission also notes that the value of the Nasdaq-100 Index is 
disseminated every 15 seconds over the Nasdaq Trade Dissemination 
System.
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    \24\ See note 8, supra.
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    The Commission finds good cause for approving the proposed rule 
change, as amended, prior to the thirtieth day after the date of 
publication of notice of filing thereof in the Federal Register. The 
Commission believes that the Notes will provide investors with an 
additional investment choice and that accelerated approval of the 
proposal will allow investors to begin trading the Notes promptly. In 
addition, the Commission notes that it has previously approved the 
listing and trading of similar Notes and other hybrid securities based 
on the Nasdaq-100.\25\ Accordingly, the Commission believes that there 
is good cause, consistent with Sections 15A(b)(6) and 19(b)(2) of the 
Act,\26\ to approve the proposal, as amended, on an accelerated basis.
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    \25\ See supra note 16.
    \26\ 15 U.S.C. 78o-3(b)(6) and 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\27\ that the proposed rule change (SR-NASD-2002-175), as amended, 
is hereby approved on an accelerated basis.

    \27\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-32317 Filed 12-23-02; 8:45 am]
BILLING CODE 8010-01-P