[Federal Register Volume 68, Number 240 (Monday, December 15, 2003)]
[Notices]
[Pages 69731-69732]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-30839]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48882; File No. S7-24-89]


Joint Industry Plan; Order Extending for One Year the Operation 
of the Reporting Plan for Nasdaq-Listed Securities Traded on Exchanges 
on an Unlisted Trading Privilege Basis, Submitted by the National 
Association of Securities Dealers, Inc., the Boston Stock Exchange, 
Inc., the Chicago Stock Exchange, Inc., the Cincinnati Stock Exchange, 
Inc., the Pacific Exchange, Inc., the American Stock Exchange LLC, and 
the Philadelphia Stock Exchange, Inc.

December 4, 2003.

I. Introduction and Description

    On August 8, 2003, the Cincinnati Stock Exchange, Inc. (``CSE'') on 
behalf of itself and the National Association of Securities Dealers, 
Inc. (``NASD''), the American Stock Exchange LLC (``Amex''), the Boston 
Stock Exchange, Inc. (``BSE''), the Chicago Stock Exchange, Inc. 
(``CHX''), the Pacific Exchange, Inc. (``PCX''), and the Philadelphia 
Stock Exchange, Inc. (``PHLX'') (hereinafter referred to collectively 
as ``Participants''),\1\ as members of the operating committee 
(``Operating Committee'' or ``Committee'') of the Plan submitted to the 
Securities and Exchange Commission (``SEC'' or ``Commission'') a 
request to extend the operation of the Plan and also to extend certain 
exemptive relief as described below.\2\ On August 12, 2003, the 
Commission issued a notice for comment and simultaneously granted 
summary effectiveness to the request to extend the operation of the 
Plan and certain exemptive relief.\3\ No comments were received in 
response to the publication of this notice.
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    \1\ The CSE was elected chair of the Operating Committee for the 
Joint Self-Regulatory Organization Plan Governing the Collection, 
Consolidation and Dissemination of Quotation and Transaction 
Information for Nasdaq-Listed Securities Traded on Exchanges on an 
Unlisted Trading Privilege Basis (``Nasdaq UTP Plan'' or ``Plan'') 
by the Participants.
    \2\ See letter from Jeffrey T. Brown, Chairman, Plan Operating 
Committee, to Jonathan G. Katz, Secretary, Commission, dated August 
8, 2003.
    \3\ See Securities Exchange Act Release No. 48318, 68 FR 49534 
(August 18, 2003).
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    The Nasdaq UTP Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation and last sale 
information for each of its Participants. This consolidated information 
informs investors of the current quotation and recent trade prices of 
Nasdaq Stock Market, Inc. (``Nasdaq'') securities. It enables investors 
to ascertain from one data source the current prices in all the markets 
trading Nasdaq securities. The Plan serves as the required transaction 
reporting plan for its Participants, which is a prerequisite for their 
trading Nasdaq securities. Currently, the Plan is scheduled to expire 
on December 16, 2003.
    This order approves, pursuant to Rule 11Aa3-2(c)(2) under the 
Securities Exchange Act of 1934 (``Act''),\4\ the request to extend 
operation of the Plan and the request to extend certain exemptive 
relief (``Date Extension'') for a one-year period \5\ expiring one year 
from the date of publication in the Federal Register.
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    \4\ 17 CFR 240.11Aa3-2(c)(2).
    \5\ As discussed in the order granting partial temporary 
approval of Amendment No. 13 to the Plan, see Securities Exchange 
Act Release No. 46729 (October 25, 2002), 67 FR 66685 (November 1, 
2002) (``Partial Approval''), proposed amendments to the Plan had 
been segregated into four categories: (1) Category 1, ``Effective 
Upon Nasdaq's Exchange Registration;'' (2) Category 2, ``Effective 
Upon Launch of the Internal SIP;'' (3) Category 3, ``Effective Upon 
End of Parallel Period--Elimination of the Legacy SIP;'' and (4) 
Category 4, ``Timing Not An Issue.'' Through the Partial Approval, 
the Commission approved the Category 2, 3, and 4 amendments on a 
pliot basis, but did not approve the Category 1 amendments. 
Therefore, the Plan the Commission extends today is the Plan, as 
modified, by all changes previously approved. In the Partial 
Approval, the Commission explicitly noted its intention to address 
the Category 1 amendments through separate action when the 
Commission acts on the Nasdaq exchange registration application. 
This order does not approve the Category 1 amendments and the 
Commission reiterates its intent to act upon the Category 1 
amendments through separate action in conjunction with the Nasdaq 
exchange registration application.
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II. Exemptive Relief

    While both Nasdaq and the NASD operate under the umbrella of a 
single

[[Page 69732]]

Plan Participant, the submission of two distinct best bids and offers 
(``BBOs'') could be deemed inconsistent with Section VI.C.1 of the 
Plan.\6\ Pursuant to the 13th Amendment of the Plan and Rule 11Aa3-
2(a),\7\ Nasdaq cannot be granted Plan Participant status until it is 
registered as a national securities exchange. While Nasdaq submits a 
distinct BBO from the NASD and until Nasdaq is registered as a national 
securities exchange, the NASD will submit quotes to the Plan's 
Securities Information Processor (``SIP'') in a manner different than 
specified in Section VI.C.1. of the Plan and, thus, in conflict with 
Commission Rule 11Aa3-2(d).\8\
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    \6\ Section VI.C.1. of the Plan, as approved by the Operating 
Committee in the 13th Amendment, states that ``[t]he Processor shall 
disseminate on the UTP Quote Data Feed the best bid and offer 
information supplied by each Participant, including the NASD. * * 
*''
    \7\ 17 CFR 240.11Aa3-2(a).
    \8\ 17 CFR 240.11Aa3-2(d). Commission Rule 11Aa3-2(d) requires a 
self-regulatory organization participant of national market system 
plan to comply with the terms of that plan.
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    As discussed at length in the notice of the 13th Amendment,\9\ the 
Commission had determined to relieve the potential conflict among the 
SuperMontage approval order,\10\ Rule 11Aa3-2,\11\ and the Plan, by 
granting the NASD an exemption under Rule 11Aa3-2(f) \12\ from 
compliance with Section VI.C.1. of the Plan as required by Rule 11Aa3-
2(d) \13\ until such time as Nasdaq is registered as a national 
securities exchange. The Plan Participants have requested an extension 
of such exemptive relief.
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    \9\ See Securities Exchange Act Release No. 46139 (June 28, 2001 
[sic]), 67 FR 44888 (July 5, 2002).
    \10\ See Securities Exchange Act Release No. 43863 (January 19, 
2001), 66 FR 8020 (January 26, 2001).
    \11\ 17 CFR 240.11Aa3-2.
    \12\ 17 CFR 240.11Aa3-2(f).
    \13\ 17 CFR 240.11Aa3-2(d).
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III. Discussion

    The Commission finds that extending the operation of the Plan is 
consistent with the requirements of the Act and the rules and 
regulations thereunder, and, in particular, Section 12(f) \14\ and 
Section 11A(a)(1) \15\ of the Act and Rules 11Aa3-1 and 11Aa3-2 
thereunder.\16\ Section 11A of the Act directs the Commission to 
facilitate the development of a national market system for securities, 
``having due regard for the public interest, the protection of 
investors, and the maintenance of fair and orderly markets,'' and cites 
as an objective of that system the ``fair competition * * * between 
exchange markets and markets other than exchange markets.'' \17\ When 
the Commission first approved of the Plan on a pilot basis, it found 
that the Plan ``should enhance market efficiency and fair competition, 
avoid investor confusion, and facilitate surveillance of concurrent 
exchange and OTC trading.'' \18\ The Plan has been in existence since 
1990 and Participants have been trading Nasdaq securities under the 
Plan since 1993.
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    \14\ 15 U.S.C. 78l(f). The Commission finds that extending the 
Plan is consistent with fair and orderly markets, the protection of 
investors and the public interest, and otherwise in furtherance of 
the purposes of the Act. The Commission has taken into account the 
public trading activity in securities traded pursuant to the Plan, 
the character of the trading, the impact of the trading of such 
securities on existing markets, and the desirability of removing 
impediments to, and the progress that has been made toward the 
development of a national market system.
    \15\ 15 U.S.C. 78k-1(a)(1).
    \16\ 17 CFR 240.11Aa3-1 and 17 CFR 240.11Aa3-2.
    \17\ 15 U.S.C. 78k-1(a).
    \18\ See Securities Exchange Act Release No. 28146 (June 26, 
1990), 55 FR 27917 (July 6, 1990).
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    The Commission finds that extending the operation of the Plan for a 
year furthers the goals described above by preventing the lapsing of 
the sole effective transaction reporting plan for Nasdaq securities 
traded by exchanges pursuant to unlisted trading privileges. The 
Commission believes that the Plan is currently a critical component of 
the national market system and that the Plan's expiration would have a 
serious, detrimental impact on the further development of the national 
market system.
    The Commission also finds that it is appropriate to extend the 
exemption under Rule 11Aa3-2(f) \19\ from compliance with Section 
VI.C.1. of the Plan as required by Rule 11Aa3-2(d).\20\ The Commission 
believes that the Plan is a critical component of the national market 
system and that the requested exemptive relief is necessary to assure 
the effective operation of the Plan. The Commission believes that the 
requested exemptive relief extension is consistent with the Act, the 
Rules thereunder, and, specifically, with the objectives set forth in 
Sections 12(f) and 11A of the Act \21\ and Rules 11Aa3-1 and 11Aa3-2 
thereunder.\22\
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    \19\ 17 CFR 240.11Aa3-2(f).
    \20\ 17 CFR 240.11Aa3-2(d).
    \21\ 15 U.S.C. 78l(f) and 15 U.S.C. 78k-1.
    \22\ 17 CFR 240.11Aa3-1 and 11Aa3-2.
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IV. Conclusion

    It is therefore ordered, pursuant to sections 12(f) and 11A of the 
Act \23\ and paragraph (c)(4) of Rule 11Aa3-2 \24\ thereunder, that the 
operation of the Plan be, and hereby is, extended and that certain 
exemptive relief also be extended until December 15, 2004.
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    \23\ 15 U.S.C. 78l(f) and 15 U.S.C. 78k-1.
    \24\ 17 CFR 240.11Aa3-2(c)(4).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(27).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-30839 Filed 12-12-03; 8:45 am]
BILLING CODE 8010-01-P