[Federal Register Volume 68, Number 208 (Tuesday, October 28, 2003)]
[Notices]
[Pages 61531-61532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27098]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48671; File No. SR-NASD-2003-135]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by National Association of 
Securities Dealers, Inc. To Aggregate Odd-Lot Amounts in for Display in 
SuperMontage Under Certain Circumstances

October 21, 2003.
    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 August 28, 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 October 20, 
2003, the Commission received 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Mary M. Dunbar, Vice President and Deputy 
General Counsel, Nasdaq to Katherine A. England, Assistant Director, 
Division of Market Regulation, Commission (dated October 17, 2003) 
(``Amendment No. 1''). Amendment No. 1 replaces and supersedes the 
original proposed rule change in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to aggregate odd-lot share amounts inside the 
inside spread for display purposes via the SIZE MMID. Nasdaq will 
implement the proposed rule change effective December 8, 2003 with the 
exact start date to be provided to market participants via a Nasdaq 
Head Trader Alert. The text of the proposed rule change is below. 
Proposed new language is in italics.
* * * * *

4707. Entry and Display of Quotes/Orders

    (a) No Change.
    (b) Display of Quotes/Orders in Nasdaq--The NNMS will display a 
Nasdaq Quotes/Orders submitted to the system as follows:
    (1) Through (2) No Change.
    (3) Exceptions--The following exceptions shall apply to the display 
parameters set forth in paragraphs (1) and (2) above:
    (A) No Change.
    (B) Aggregation and Display of Odd-lots Bettering the Inside 
Price--odd-lot share amounts that remain in system at prices that 
improve the best bid/offer in Nasdaq shall be subject to aggregation 
for display purposes, via the SIZE MMID, with the odd-lot share amounts 
of other NNMS Quoting Market Participants and NNMS Order Entry Firms at 
those same price level(s). Such odd-lots will be displayed via SIZE if 
1) the combination of all such odd-lots at a particular price level is 
equal to, or more than, a round-lot and 2) that the price level 
represents either the highest bid or lowest offer price within the 
system. This aggregation shall display only the maximum round-lot 
portion of the total combined shares available at that best-priced 
level. This aggregation shall be for display purposes only and all 
individual odd-lot share amounts that are part of any such aggregation 
shall continue to be processed by the system based on the time-priority 
of their original entry.
    (c) Through (e) 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
    Currently, the rules of the SuperMontage system provide that odd-
lot share amounts of individual market participants are not displayed 
but otherwise generally remain in the system at their original price 
level and with the time-priority of their original entry. In some cases 
this may result in individual odd-lots being available at prices better 
than the displayed Nasdaq inside, but that are hidden from public view. 
In an attempt to increase transparency in the system in this situation, 
Nasdaq proposes in this filing to aggregate and display through SIZE 
the single best price level of any buy or sell odd-lots that are priced 
better than the Nasdaq inside market and that combined equal or are 
larger to or larger than one round-lot.\4\ This aggregation will be for 
display purposes only, each individual odd-lot that is added together 
and displayed will retain their individual execution priority in the 
system and will continue to be processed individually.
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    \4\ Since the aggregation of odd-lots proposed here may involve 
the odd-lot quote/orders of more than one market participant, Nasdaq 
has determined to use the SIZE MMID to represent this combined 
trading interest. Though aggregated under SIZE, the firm identity of 
odd-lot attributed quote/orders that are thereafter executed will be 
provided to counter-parties.
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2. Statutory Basis

    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\5\ in general and with 
Section 15A(b)(6) of the Act,\6\ 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.
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    \5\ 15 U.S.C. 78o-3.
    \6\ 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, as amended.

[[Page 61532]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Nasdaq has neither solicited nor received written comments on the 
proposed rule change.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2003-135 should be submitted by November 18, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-27098 Filed 10-27-03; 8:45 am]
BILLING CODE 8010-01-P