[Federal Register Volume 69, Number 35 (Monday, February 23, 2004)]
[Notices]
[Pages 8253-8255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-3775]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49247; File No. SR-NASD-2004-029]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Dual Listing

February 13, 2004.
    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 February 12, 2004, 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. Nasdaq filed 
the proposed rule change pursuant to section 19(b)(3)(A)(i) of the 
Act,\3\ and Rule 19b-4(f)(1) thereunder,\4\ as one constituting a 
stated policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule, which renders the 
proposed rule change effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1)
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.
4400. NASDAQ National Market--Issuer Designation Requirements
    Pursuant to SEC Rule 11Aa2-1, those securities for which 
transaction reporting is required by an effective transaction reporting 
plan are designated as national market system securities. A transaction 
reporting plan has been filed with the Commission under which 
securities satisfying the requirements of this Rule 4400 Series are 
covered by the transaction reporting plan and transactions in such 
securities are subject to the transaction reporting provisions of the 
Rule 4630 Series.

IM-4400 Impact of Non-Designation of Dually Listed Securities

    To foster competition among markets and further the development of 
the national market system following the repeal of NYSE Rule 500, 
Nasdaq shall permit issuers whose securities are listed on the New York 
Stock Exchange to apply also to list those securities on the Nasdaq 
National Market (``NNM''). Nasdaq shall make an independent 
determination of whether such issuers satisfy all applicable listing 
requirements and shall require issuers to enter into a dual listing 
agreement with Nasdaq.
    While Nasdaq shall certify such dually listed securities for 
listing on the NNM, Nasdaq shall not exercise its authority under the 
NASD Rule 4400 Series separately to designate or register such dually 
listed securities as Nasdaq national market system securities within 
the meaning of Section 11A of the Securities Exchange Act of 1934 or 
the rules thereunder. As a result, these securities, which are already 
designated as national market system securities under the Consolidated 
Quotation Service (``CQS'') and Consolidated Tape Association national 
market system

[[Page 8254]]

plans (``CQ and CTA Plans''), shall remain subject to those plans and 
shall not become subject to the Nasdaq UTP Plan, the national market 
system plan governing securities designated by the Nasdaq Stock Market. 
For purposes of the national market system, such securities shall 
continue to trade under their current one, two, or three-character 
ticker symbol. Nasdaq shall continue to send all quotations and 
transaction reports in such securities to the processor for the CTA 
Plan. In addition, dually listed issues that are currently eligible for 
trading via the Intermarket Trading System (``ITS'') shall remain so 
and continue to trade on the Nasdaq Intermarket trading platform as 
they do today.
    Through this interpretation, Nasdaq also resolves any potential 
conflicts that arise under NASD rules as a result of a single security 
being both a CQS security, which is subject to one set of rules, and a 
listed NNM security, which is subject to a different set of rules. 
Specifically, dually listed securities shall be Nasdaq securities for 
purposes of rules related to listing and delisting, and shall remain as 
CQS securities under all other NASD rules. Treating dually listed 
securities as CQS securities under NASD rules is consistent with their 
continuing status as CQS securities under the CTA, CQ, and ITS national 
market system, as described above. This interpretation also preserves 
the status quo and avoids creating potential confusion for investors 
and market participants that currently trade these securities on the 
Nasdaq InterMarket.
    For example, Nasdaq shall continue to honor the trade halt 
authority of the primary market under the CQ and CT Plans. NASD Rule 
4120(a)(2) and (3) governing CQS securities shall apply to dually 
listed securities, whereas NASD Rule 4120(a)(1), (4), (5), (6), and (7) 
shall not. SEC Rule 10a-1 governing short sales of CQS securities shall 
continue to apply to dually listed securities, rather than NASD Rule 
3350 governing short sales of Nasdaq listed securities. Market makers 
in dually listed securities shall retain all obligations imposed by the 
NASD Rule 5200, 6300, and 6400 Series regarding quoting, trading, and 
transaction reporting of CQS securities rather than assuming the 
obligations appurtenant to quoting, trading, and transaction reporting 
of Nasdaq listed securities. The fees applicable to CQS securities set 
forth in NASD Rule 7010 shall continue to apply to dually listed 
issues.
* * * * *

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. 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
    The recent repeal of NYSE Rule 500 removed a significant barrier to 
competition that inhibited NYSE-listed companies from listing on other 
markets.\5\ In light of that repeal, Nasdaq has determined to permit 
the dual listing of NYSE-listed securities on Nasdaq. Consistent with 
section 11A(a)(1)(C)(ii) of the Exchange Act, Nasdaq believes this 
action will promote fair competition between exchange markets and 
markets other than exchange markets, and by furthering the development 
of the national market system. Dual listing will allow companies to 
demonstrate to their shareholders and to investors that they meet 
Nasdaq's governance requirements. In addition, dual listing on Nasdaq 
with its competitive market maker system should benefit investors and 
shareholders by increasing liquidity, reducing execution time, and 
narrowing spreads. The comparison between executions on Nasdaq and on 
the NYSE should also enable listed companies to assess the benefits of 
a Nasdaq listing.
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    \5\ See Securities Exchange Act Release No. 48720 (October 30, 
2003), 68 FR 62645 (November 5, 2003) (SR-NYSE-2003-23) (approval 
order).
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    The proposed interpretation of NASD Rule 4400 is designed to 
facilitate the transition to dual listing on NYSE and Nasdaq, and to 
minimize the potential for confusion among investors, shareholders, and 
market participants that trade these securities. Specifically, Nasdaq 
will exercise its discretion to refrain from designating or registering 
such securities as Nasdaq national market system securities and thereby 
subjecting them to coverage under the Nasdaq UTP Plan. As a result, 
these securities, which are already designated as national market 
system securities under the Consolidated Quotation Service and 
Consolidated Tape Association national market system plans (``CQ and 
CTA Plans'') will remain subject to those plans and will not become 
subject to the Nasdaq UTP Plan, the national market system plan 
governing securities designated by the Nasdaq Stock Market.\6\ At this 
time, Nasdaq believes that subjecting a single security to two national 
market system plans would potentially cause confusion to public 
investors and market participants that are unaccustomed to dual 
listings among the nation's major equity markets.
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    \6\ Nasdaq's interpretation resolves all potential ambiguity in 
its rules to avoid a conflict between national market system plans. 
For example, Nasdaq's interpretation is consistent with NASD Rule 
4440(a)(5)(C), which pertains to designation or registration of a 
CQS national market system security as a Nasdaq national market 
system security.
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    Based upon this interpretation, Nasdaq will regard dually listed 
securities as CQS securities rather than as Nasdaq listed securities 
for quoting, trading, and transaction reporting purposes. As a result, 
dually listed securities shall continue to be traded under their 
current one, two, or three-character ticker symbol, rather than trading 
under a four-character symbol as do exclusively listed NNM securities. 
In addition, Nasdaq will continue to send all quotation and transaction 
reports for consolidation and dissemination to the Securities Industry 
Automation Corporation, the securities information processor for the CQ 
and CT Plans, rather than sending them to Nasdaq, the processor for the 
Nasdaq UTP Plan. Dually listed issues will continue to trade over the 
Intermarket Trading System (``ITS'') and on the Nasdaq Intermarket 
trading platform as CQS securities as they do today.\7\
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    \7\ The current trading platform for CQS securities is the 
Computer Assisted Execution System or ``CAES''. Nasdaq has filed SR-
NASD-2003-149 to propose to implement the Nasdaq's SuperMontage as 
the trading platform for the InterMarket. As the trading platform 
for the InterMarket, SuperMontage will continue to process 
quotation, trading, and transaction reporting for CQS securities in 
compliance with the CQ/CT and ITS Plans.
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    Nasdaq is also resolving potential conflicts that may arise under 
NASD rules as a result of a single security being both a CQS security, 
which is subject to one set of rules, and a listed NNM security, which 
is subject to a different set of rules. Specifically, while dually 
listed securities will be Nasdaq securities for purposes of rules 
related to listing and delisting, they will remain as CQS securities 
under all other NASD rules. Regarding dually listed securities as CQS 
securities under NASD rules is consistent with their continuing status 
as CQS securities under the CT, CQ, and

[[Page 8255]]

ITS national market system, as described above. This interpretation 
also preserves the status quo and avoids creating potential confusion 
for investors and market participants that currently trade these 
securities on the Nasdaq InterMarket.
    Dually listed securities will be regarded as CQS securities in all 
cases where NASD rules governing quotation, trading, and transaction 
reporting refer to CQS securities or Nasdaq listed securities or both. 
For example, Nasdaq will not exercise its authority under NASD Rule 
4120(a)(1), (4), (5), and (6) to halt trading in Nasdaq listed 
securities but will instead defer to the trade halt authority of the 
primary market under the CQ and CT Plans and apply NASD Rule 4120(a)(2) 
and (3) governing CQS securities. Rule 10a-1 under the Act \8\ 
governing short sales of CQS securities shall continue to apply to 
dually listed securities, rather than NASD Rule 3350 governing short 
sales of Nasdaq listed securities. Market makers in dually listed 
securities will retain all obligations imposed by the NASD Rule 5200, 
6300, and 6400 Series regarding quoting, trading, and transaction 
reporting of CQS securities rather than assuming the obligations 
appurtenant to quoting, trading, and transaction reporting of Nasdaq 
listed securities. The fees applicable to trading of CQS securities, 
set forth in NASD Rule 7010, will continue to apply to dually listed 
issues.
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    \8\ 17 CFR 240.10a-1.
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2. Statutory Basis
    Nasdaq believes that the proposed interpretation is consistent with 
the provisions of section 15A(b)(6) of the Act \9\ in that treating 
dually listed securities as CQS securities is specifically designed to 
foster cooperation and coordination with persons 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 to protect investors and the public interest. Nasdaq also 
believes the interpretation is also consistent with the provisions of 
section 15A(b)(6) of the Act \10\ in that it is designed to produce 
fair and informative quotations and to promote orderly procedures for 
collecting, distributing, and publishing quotations.
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    \9\ 15 U.S.C. 78o-3(b)(6).
    \10\ 15 U.S.C. 78o-3(b)(11).
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    Finally, Nasdaq believes the proposed interpretation also supports 
the goals of section 11A, particularly the protection of investors, the 
maintenance of fair and orderly markets and fair competition among 
brokers and dealers, among exchange markets, and between exchange 
markets and markets other than exchange markets.

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

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. To the contrary, 
Nasdaq believes the proposed interpretation is designed to facilitate 
competition for listing and multiple listings.

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

    Nasdaq neither solicited nor received written comments with respect 
to the proposed rule change.

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

    The foregoing proposal has become effective pursuant to section 
19(b)(3)(A)(i) of the Act,\11\ and Rule 19b-4(f)(1) \12\ thereunder, in 
that it constitutes a stated policy and interpretation with respect to 
the meaning of an existing rule.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(i).
    \12\ 17 CFR 240.19b-4(f)(1).
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    At any time within 60 days of the filing of the proposed rule 
change, 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-NASD-2004-029. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review comments more efficiently, comments should be sent in hardcopy 
or by e-mail but not by both methods. 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-2004-029 and should be 
submitted by March 15, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-3775 Filed 2-20-04; 8:45 am]
BILLING CODE 8010-01-P