[Federal Register Volume 68, Number 33 (Wednesday, February 19, 2003)]
[Notices]
[Pages 8054-8055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3944]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47344; File No. SR-NASD-2003-05]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendments Nos. 1 and 2 
Thereto, by the National Association of Securities Dealers, Inc. To 
Clarify Rule 4701(o) Regarding the Ability of UTP Exchanges To Enter 
Non-Attributable Quotes/Orders Into Nasdaq's SuperMontage System

February 11, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(''Exchange Act'' or ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on January 17, 2003, 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. 
On January 30, 2003, Nasdaq filed Amendment No. 1 to the proposal.\3\ 
On February 6, 2003, Nasdaq filed Amendment No. 2 to the proposal.\4\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------

    \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 January 30, 2003 
(``Amendment No. 1''). In Amendment No. 1, Nasdaq provided a basis 
for waiving the 30-day operative delay.
    \4\ See letter from Thomas P. Moran, Associate General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division, 
Commission, dated February 6, 2003 (``Amendment No. 2''). In 
Amendment No. 2, Nasdaq amended the proposed rule change language 
for Rule 4701(o) to reflect changes approved by the Commission in 
Release No. 34-47301 (January 31, 2003), 68 FR 6236 (February 6, 
2003). For the purposes of calculating the 60-day abrogation period, 
the Commission considers the period to have commenced on February 6, 
2003, the date Nasdaq filed Amendment No. 2.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The NASD proposes to amend NASD Rule 4701(o) to clarify the ability 
of UTP Exchanges to enter Non-Attributable Quotes/Orders into the 
Nasdaq National Market Execution System (``NNMS'' or ``SuperMontage''). 
The text of the proposed rule change is below. Proposed new language is 
italicized.
    4700. NASDAQ National Market Execution System (NNMS)
    4701. Definitions--Unless stated otherwise, the terms described 
below shall have the following meaning:
    (a) through (n) No Change.
    (o) The term ``Non-Attributable Quote/Order'' shall mean a bid or 
offer Quote/Order that is entered by a Nasdaq Quoting Market 
Participant or NNMS Order Entry Firm and is designated for display 
(price and size) on an anonymous basis in the Nasdaq Order Display 
Facility. UTP Exchanges may submit Non-Attributable Quote/Order(s) in 
conformity with Rule 4710(e).
    (p) through (jj) No Change.

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 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
    On July 1, 2002, Nasdaq filed SR-NASD-2002-91 with the Commission 
setting forth rules governing the entry of orders and quotes by UTP 
Exchanges into Nasdaq's SuperMontage system.\5\ As explained in that 
filing, UTP Exchanges that elect to participate in the system are 
allowed to enter a single bid Quote/Order and a single offer Quote/
Order representing their principal trading interest that will displayed 
along with the UTP Exchange's identifier in the Nasdaq Quotation 
Montage. If that Attributed Quote/Order falls with the number of price 
levels subject to aggregation, that UTP Quote/Order will be included in 
the total aggregated share amounts displayed by the system. For their 
agency Quotes/Orders, UTP Exchanges that elect to participate in 
SuperMontage can send one, or multiple, Non-Attributable Quote/Orders 
to the system. These Quotes/Orders will be displayed under 
SuperMontage's SIZE MMID. In order to make clear the ability of 
participating UTP Exchanges to enter Non-Attributable Quotes/ Orders 
for their agency customers, Nasdaq proposes to amend the definition of 
Non-Attributable Quote/Order in NASD Rule 4701(o) to reference NASD 
Rule 4710(e) that authorizes and governs UTP Exchange capabilities in 
SuperMontage.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 46343 (August 13, 
2002), 67 FR 53822 (August 19, 2002) (File No. SR-NASD-2002-91 
regarding the voluntary participation of national securities 
exchanges in the SuperMontage).
---------------------------------------------------------------------------

2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\6\ in general, and with 
section 15A(b)(6) of the Act,\7\ in particular, in that it 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 a national market 
system, and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78o-3.
    \7\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq believes that the proposed rule change will not impose 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

    Nasdaq has not solicited nor received any written comments with 
respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule: (1) Does not significantly 
affect the protection of investors or the public interest; (2) does not 
impose any significant burden on competition; and (3) does not become 
operative for 30 days or such shorter time as the

[[Page 8055]]

Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to section 19(b)(3)(A) of the Act,\8\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\ At any time within 60 
days of the filing of the proposed rule change, as amended, the 
Commission may summarily abrogate such rule change if it appears to the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    Nasdaq has requested that the Commission waive the 30-day operative 
delay. Nasdaq believes the proposed rule change clarifies a 
functionality that is already available to UTP Exchanges. In 
particular, as already set forth in NASD Rule 4710(e), the proposed 
rule change makes clear that a UTP Exchange participating in the 
SuperMontage may enter Non-Attributable Quotes/Orders for their agency 
customers into the system using the SIZE MMID.\10\
---------------------------------------------------------------------------

    \10\ See Amendment No. 1, supra note 3.
---------------------------------------------------------------------------

    The Commission believes that it is consistent with the protection 
of investors and the public interest to waive the 30-day operative 
delay.\11\ The Commission notes that this proposal merely clarifies the 
ability of UTP Exchanges to enter Non-Attributable Quotes/Orders, as 
currently permitted by the system.
---------------------------------------------------------------------------

    \11\ For purposes of only accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition and capital formation. 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

IV. 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-2003-05 and should be submitted by March 21, 2003. 

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-3944 Filed 2-18-03; 8:45 am]
BILLING CODE 8010-01-P