[Federal Register Volume 69, Number 62 (Wednesday, March 31, 2004)]
[Notices]
[Pages 17006-17009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7149]



[[Page 17006]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49471; File No. SR-NASD-2004-037]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc., Revising the Pilot Relating to the Issuance 
of Market Participant Identifiers

March 25, 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 March 1, 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 has 
designated the proposed rule change as ``non-controversial'' under 
section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    The proposed rule change would enable members that are registered 
as market makers or electronic communications networks (``ECNs'') to 
request and receive up to a total of ten market participant identifiers 
(``MMIDs'') with which to enter Attributable Quotes/Orders in the 
Nasdaq Quotation Montage. In addition, to reflect the increased number 
of MMIDs available with attributable display privileges to an 
individual member, the filing proposes technical changes to the policy 
re-allocating attributable display privileges when Nasdaq reaches its 
technological limit for such privileges. The text of the proposed rule 
change is set forth below. Proposed new language is in italics; 
proposed deletions are in [brackets].
* * * * *

4613. Character of Quotations

(a) Quotation Requirements and Obligations
    (1) Two-Sided Quote Obligation. For each security in which a member 
is registered as a market maker, the member shall be willing to buy and 
sell such security for its own account on a continuous basis and shall 
enter and maintain a two-sided quotation (``Principal Quote''), which 
is attributed to the market maker by a special maker participant 
identifier (``MMID'') and is displayed in the Nasdaq Quotation Montage 
at all times, subject to the procedures for excused withdrawal set 
forth in Rule 4619.
    (A) No Change.
    (B) No Change.
    (2) The first MMID issued to a member pursuant to subparagraph (1) 
of this rule, or Rule 4623, shall be referred to as the member's 
``Primary MMID.'' For a six-month pilot period beginning March 1, 2004, 
market makers and ECNs may request the use of [a second MMID.] 
additional MMIDs that shall be referred to as ``Supplemental MMIDs.'' 
Market makers and ECNs may be issued up to nine Supplemental MMIDs. A 
market maker may request the use of [a second] Supplemental MMIDs for 
displaying Attributable Quotes/Orders in the Nasdaq Quotation Montage 
for any security in which it is registered and meets the obligations 
set forth in subparagraph (1) of this rule. An ECN may request the use 
of [a second] Supplemental MMIDs \5\ for displaying Attributable 
Quotes/Orders in the Nasdaq Quotation Montage for any security in which 
it meets the obligations set forth in Rule 4623. A market maker or ECN 
that ceases to meet the obligations appurtenant to its [first] Primary 
MMID in any security shall not be permitted to use [the second] a 
Supplemental MMID for any purpose in that security.
---------------------------------------------------------------------------

    \5\ The Commission corrected the proposed rule text to italicize 
the letter ``s'' which is new language. Telephone conversation 
between Peter R. Geraghty, Associate Vice President and Associate 
General Counsel, Nasdaq, and Ann E. Leddy, Special Counsel, Division 
of Market Regulation (``Division''), Commission (March 16, 2004).
---------------------------------------------------------------------------

    (3) Members that are permitted the use of [second] Supplemental 
MMIDs for displaying Attributable Quotes/Orders pursuant to 
subparagraph (2) of this rule are subject to the same rules applicable 
to the members' first quotation, with two exceptions: (a) the 
continuous two-sided quote requirement and excused withdrawal 
procedures described in subparagraph (1) above, as well as the 
procedures described in Rule 4710(b)(2)(B) and (b)(5), do not apply to 
market makers' [second] Supplemental MMIDs; and (b) [the second] 
Supplemental MMIDs may not be used by market makers to engage in 
passive market making or to enter stabilizing bids pursuant to NASD 
Rules 4614 and 4619.
    (b)-(e) No Change.
* * * * *
IM-4613-1--Procedures for Allocation of Second Displayable MMIDs
    Nasdaq has a technological limitation on the number of displayed, 
attributable quotations in an individual security, although it has not 
reached that maximum to date in any security. Therefore, Nasdaq must 
consider the issuance and display of [a second] Supplemental MMIDs to 
be a privilege and not a right. Nasdaq has developed the following 
method for allocating the privilege of receiving and displaying [a 
second] Supplemental MMIDs with attributable display privileges 
(``display privileges'') in an orderly, predictable, and fair manner on 
a stock-by-stock basis.
    As described in Rule 4613, Nasdaq will automatically designate a 
market maker's first MMID as a ``Primary MMID'' and [its second] any 
additional MMIDs as [a] ``[Secondary] Supplemental \6\ MMIDs.'' Market 
makers are required to use their Primary MMID in accordance with the 
requirements of NASD Rule 4613(a)(1) above, as well as all existing 
requirements for the use of MMIDs in Nasdaq systems. Market makers' use 
of [Secondary] Supplemental MMIDs [are] is \7\ subject to the 
requirements set forth in NASD Rule 4613(a)(2) and (a)(3) above, 
including the prohibition on passive market making. However, the two-
sided quote requirement, and the excused withdrawal procedures under 
NASD Rule 4619, and 4710(b)(2)(B) and (b)(5) will not apply to [the 
secondary] Supplemental MMIDs. Nasdaq will automatically designate each 
ECN's MMIDs as Primary and [Secondary] Supplemental. Each ECN MMID will 
be subject to the requirements of NASD Rule 4623 and the existing ECN 
requirements of the NASD Rule 4700 Series. Members may also use [a

[[Page 17007]]

Secondary] Supplemental MMIDs to enter non-attributable orders into 
SIZE.
    Nasdaq, in conjunction with the NASD, has developed procedures to 
maintain a high level of surveillance and member compliance with its 
rules with respect to members' use of both Primary and [Secondary] 
Supplemental MMIDs to display quotations in Nasdaq systems. If it is 
determined that [a Secondary] one or more Supplemental MMIDs [is] are 
being used improperly, Nasdaq will withdraw its grant of the 
[Secondary] Supplemental MMID(s) for all purposes for all securities. 
In addition, if a market maker or ECN no longer fulfills the conditions 
appurtenant to its Primary MMID (e.g., by being placed into an 
unexcused withdrawal), it may not use [the Secondary] a Supplemental 
MMID for any purpose in that security.
    The first priority of Nasdaq's method for allocating the privilege 
of displaying [a second] Supplemental MMIDs is that each market maker 
or ECN should be permitted to register to display a single quotation in 
a security under [its] a Primary MMID before any is permitted to 
register to display [a second] additional quotations under [a 
Secondary] Supplemental MMIDs. [Each market maker or ECN may register 
its Primary MMID to display a quotation in a security, on a first-come-
first-served basis. After each market maker or ECN has been permitted 
to register its Primary MMID to display quotations in a stock,] If all 
requests for Primary MMIDs have been satisfied, Nasdaq will then 
register [Secondary] Supplemental MMIDs to display Attributed Quotes/
Orders in that security on a first-come-first-served basis, consistent 
with the procedures listed below. If Nasdaq comes within [five] ten 
MMIDs with display privileges of its maximum in a particular security, 
Nasdaq will temporarily cease registering [additional Secondary] 
Supplemental MMIDs with display privileges in that security and reserve 
those [five] ten remaining [MMIDs] display privileges for members that 
may register their Primary MMID in that stock in the future. If Nasdaq 
allocates those reserved [MMIDs] display privileges to members 
requesting Primary MMIDs and then receives additional requests for 
Primary MMIDs, it will use the procedure described below to re-allocate 
[Secondary MMIDs] display privileges to members requesting Primary 
MMIDs.
    For any stock in which Nasdaq has reached the maximum number of 
members registered to display quotations, once each month, Nasdaq will 
rank each of the market participants that has [two MMIDs] more than one 
Supplemental MMID with display privileges in the stock according to 
their monthly volume of trading, based on the [lower] volume of that 
participant's [two] least used Supplemental MMID[s] with display 
privileges. Nasdaq will withdraw the [second MMID] display privilege 
associated with [of] the lowest volume [of] Supplemental MMID of the 
participant in that ranking and assign that privilege to the first 
member that requested a Primary MMID or Supplemental MMID, with Primary 
MMIDs always taking precedence [the ability to display a second 
quotation]. Nasdaq will repeat this process as many times as needed to 
accommodate all pending requests for Primary and [Secondary] 
Supplemental MMIDs. If after following this process (or at the outset 
of the allocation process) no member has more than one Supplemental 
MMID with display privileges, members will be ranked based upon the 
volume associated with their Supplemental MMID, and Nasdaq will 
withdraw the display privilege from the member with the lowest volume 
Supplemental MMID.
    Members that lose the display privilege associated with a 
Supplemental MMID [The low-ranking member(s) will lose the ability to 
display a second quotation in that security for that month, but] will 
still be permitted to use the [second] Supplemental MMID to enter non-
attributable orders into SIZE for that security or any other, and to 
display [a second] additional quotes in any stocks in which [it is] 
they are properly registered to do so, subject to the conditions 
described in the rule and this interpretive material.
    The objective of the procedure is to re-allocate the display 
privileges from the least used Supplemental MMIDs to those members 
requesting Primary or Supplemental MMIDs. For example, assume with 
respect to security WXYZ member A has nine Supplemental MMIDs with 
display privileges (which is the maximum--1 Primary MMID + 9 
Supplemental MMIDs = 10 MMIDs with display privileges), member B has 
three Supplemental MMIDs with display privileges, and member C has 
three Supplemental MMIDs with display privileges and is requesting a 
fourth. After conducting the monthly ranking, one of B's Supplemental 
MMIDs is the least used in WXYZ, C has the next lowest volume 
Supplemental MMID with display privileges in the security, and A has 
the next lowest in the security after C (i.e., the order for forfeiting 
their display privilege is: B, C, then A). Based on this ranking, 
Nasdaq would re-allocate one of B's display privileges to C. As a 
result, A keeps its privileges for all nine of its Supplemental MMIDs 
in WXYZ, C adds a Supplemental MMID with display privileges in the 
security, and B loses a display privilege in WXYZ `` B does not lose 
use of the Supplemental MMID for submitting non-attributable orders in 
WXYZ to SIZE, and it does not lose display privileges in any other 
security in which it is authorized to use the Supplemental MMID. 
---------------------------------------------------------------------------

    \6\ The Commission corrected the proposed rule text to italicize 
the word ``Supplemental'' which is new language. Telephone 
conversation between Peter R. Geraghty, Associate Vice President and 
Associate General Counsel, Nasdaq, and Ann E. Leddy, Special 
Counsel, Division, Commission (March 16, 2004).
    \7\ The Commission corrected the proposed rule text to change 
``are'' to ``is.'' Telephone conversation between Peter R. Geraghty, 
Associate Vice President and Associate General Counsel, Nasdaq, and 
Ann E. Leddy, Special Counsel, Division, Commission (March 16, 
2004).
---------------------------------------------------------------------------

* * * * *

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
    Nasdaq is proposing to increase to ten the number of MMIDs 
available to individual market makers and ECNs to display attributable 
quotes and orders in the Nasdaq Quotation Montage. In addition, to 
reflect the increased number of MMIDs available with attributable 
display privileges, the filing proposes technical changes to Nasdaq's 
procedures for re-allocating the privileges when Nasdaq reaches its 
technological limit for displayed, attributable MMIDs.
    Nasdaq recently established a pilot program in which market makers 
and ECNs can request and receive a second MMID with which they can 
submit Attributable Quotes/Orders to the Nasdaq Quotation Montage 
(i.e., an additional MMID with ``display privileges'').\8\ Nasdaq is 
proposing to increase to ten the total number of MMIDs with display 
privileges a market maker or ECN can be issued. Under the

[[Page 17008]]

current pilot program, they are limited to two. Under the revised pilot 
program, MMIDs two through ten would be known as ``Supplemental 
MMIDs,'' whereas the first MMID issued to a member would continue to be 
known as the member's ``Primary MMID.''
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release Nos. 47954 (May 30, 
2003), 68 FR 34017 (June 6, 2003) (SR-NASD-2003-87) (notice of 
filing and immediate effectiveness of pilot program); 48619 (October 
9, 2003), 68 FR 59832 (October 17, 2003) (SR-NASD-2003-137) 
(extension of pilot program for a six-month period beginning 
September 1, 2003); and 49409 (March 12, 2004) (SR-NASD-2004-035) 
(extension of pilot program for a six-month period beginning March 
1, 2004).
---------------------------------------------------------------------------

    According to Nasdaq, the purpose of the current dual MMID pilot 
program is to provide market makers and ECNs the flexibility to route 
orders and quotes to SuperMontage from different units within their 
firms, including market making, arbitrage, retail, and institutional 
trading desks, among others. Increasing to ten the potential number of 
MMIDs with display privileges available to each market maker and ECN 
would provide these members even greater flexibility in managing their 
orders and quotes. Nasdaq believes this proposal would benefit the 
Nasdaq market by enabling members to contribute more liquidity, add to 
the transparency of trading interest, and better serve the needs of 
investors.\9\
---------------------------------------------------------------------------

    \9\ Nasdaq will assess no fees for the issuance or use of a 
Supplemental MMIDs, other than the Commission-approved transaction 
fees set forth in NASD Rule 7010.
---------------------------------------------------------------------------

    The restrictions on the use of the increased number of MMIDs 
available with display privileges (i.e., Supplemental MMIDs three 
through nine) would be the same as those presently applicable to a 
market maker's or ECN's second MMID. In other words, market makers that 
display additional Attributable Quotes/Orders under a Supplemental MMID 
would be required to comply with all rules applicable to market makers 
that display a single Attributable Quote/Order, and ECNs would be 
required to comply with all rules applicable to ECNs in their display 
of Attributable Quotes/Orders. There would be only two exceptions to 
this general principle. First, the continuous two-sided quote 
requirement and excused withdrawal procedures, as well as the 
procedures described in Rule 4710(b)(2)(B) and (b)(5) would not apply 
to market makers' use of Supplemental MMIDs. Second, a market maker 
would be permitted to use only one MMID, its Primary MMID, to engage in 
passive market making or to enter stabilizing bids pursuant to NASD 
Rules 4614 and 4619.\10\ In all other respects, market makers and ECNs 
would have the same rights and obligations in using a Supplemental MMID 
to enter quotes and orders and to display quotations as they do today.
---------------------------------------------------------------------------

    \10\ The Commission revised this sentence to clarify that the 
Primary MMID is the only MMID a market maker would be permitted to 
use to engage in passive market making or to enter stabilizing bids. 
Telephone conversation between Peter R. Geraghty, Associate Vice 
President and Associate General Counsel, Nasdaq, and Ann E. Leddy, 
Special Counsel, Division, Commission (March 16, 2004).
---------------------------------------------------------------------------

    Just as with its decision to grant members use of a second MMID, 
the decision to allow members the use of up to ten MMIDs with display 
privileges must be balanced against the need to protect the integrity 
of the Nasdaq market. In this regard, market makers and ECNs would be 
prohibited from using a Supplemental MMID to accomplish indirectly what 
they are prohibited from doing directly through a single MMID. For 
example, members would not be permitted to use a Supplemental MMID to 
avoid their Manning obligations under IM-2110-2, best execution 
obligations under NASD Rule 2320, or their obligations under the 
Commission's Order Handling Rules.\11\ To the extent that the 
allocation of Supplemental MMIDs were to create regulatory confusion or 
ambiguity, every inference would be drawn against the use of 
Supplemental MMIDs in a manner that would diminish the quality or rigor 
of the regulation of the Nasdaq market.\12\ Accordingly, if it were to 
be determined that a Supplemental MMID was being used improperly, 
Nasdaq would withdraw its grant of all Supplemental MMIDs for all 
purposes for all securities.\13\
---------------------------------------------------------------------------

    \11\ Members also would be required to continue to comply with 
the firm quote rule, the OATS rules, and the Commission's order 
routing and execution quality disclosure rules. In addition, NASD 
Rule 4613(a) specifically prohibits firms from displaying a second 
Attributable Quote/Order to engage in passive market making or to 
enter stabilizing bids because this could violate NASD Rules 4614 
and 4619 and Regulation M under the Act.
    \12\ The Commission revised this sentence to insert the first 
clause. Telephone conversation between Peter R. Geraghty, Associate 
Vice President and Associate General Counsel, Nasdaq, and Ann E. 
Leddy, Special Counsel, Division, Commission (March 16, 2004).
    \13\ The Commission revised this sentence to clarify that all 
Supplemental MMIDs would be withdrawn in the event that any 
Supplemental MMID was used improperly. Telephone conversation 
between Thomas Moran, Associate Vice President and Associate General 
Counsel, Nasdaq, and Terri Evans, Assistant Director, Division, 
Commission (March 24, 2004).
---------------------------------------------------------------------------

    The filing also proposes technical modifications to IM-4613-1 to 
reflect the increased number of MMIDs available with display 
privileges. IM-4613-1 governs the procedures for re-allocating display 
privileges when Nasdaq reaches its technological limit for displayed, 
attributable quotations in an individual security. The filing also 
would add an example illustrating the re-allocation procedures. Nasdaq 
represents that it has not reached the maximum display privileges to 
date in any security.
    Under the revised procedures, Nasdaq would increase from five to 
ten the number of display privileges it would reserve for members 
seeking Primary MMIDs. In addition, as explained below, Nasdaq would 
modify the procedures so that the rankings will be based only on the 
volume associated with a member's second through ninth Supplemental 
MMIDs with display privileges--Primary MMIDs and a member's first 
Supplemental MMID with display privileges would be excluded from the 
calculation and thus the re-allocation process. In excluding the first 
Supplemental MMID, Nasdaq is attempting to allow members to retain at 
least one Supplemental MMID.\14\ When re-allocating the display 
privileges, requests for Primary MMIDs would continue to receive 
precedence over requests for Supplemental MMIDs.
---------------------------------------------------------------------------

    \14\ Members' display privileges associated with their first 
Supplemental MMIDs would be included in the ranking and re-
allocation process when no member has more than one Supplemental 
MMID, whether at the outset of a re-allocation process or when 
additional requests for Primary or Supplemental display privileges 
remain unfilled after the routine process re-allocates the display 
privileges associated with Supplemental MMIDs two through nine of 
all members. In these situations members would be ranked based upon 
the volume associated with their first Supplemental MMID, and Nasdaq 
would withdraw the display privilege from the member with the lowest 
volume Supplemental MMID.
---------------------------------------------------------------------------

    Currently, members with dual MMIDs are ranked monthly based on the 
lower volume between their two MMIDs--their Primary MMID and their 
second MMID. The member with the lowest volume would be the first to 
lose the display privileges associated with its second MMID. The re-
allocation would progress through the second, third, fourth, fifth, 
etc., lowest volume member until all outstanding requests for 
Supplemental MMIDs have been fulfilled.\15\
---------------------------------------------------------------------------

    \15\ This same process would be used to re-allocate display 
privileges if a member requests a Primary MMID. As discussed 
earlier, requests for Primary MMIDs always receive precedence over 
requests for Supplemental MMIDs.
---------------------------------------------------------------------------

    Under the revised procedures, after excluding their first 
Supplemental MMID with display privileges, members would be ranked on 
the basis of their lowest volume Supplemental MMID with display 
privileges.\16\ The member with lowest volume would continue to be the 
first to lose the display privilege, but only with respect to the 
Supplemental MMID that caused them

[[Page 17009]]

to have the lowest ranking; the member would not lose its authority to 
use the Supplemental MMID in that security to submit quotes and orders 
to SIZE or the display privileges associated with that Supplemental 
MMID with respect to other securities in which it is permitted to use 
the identifier. The objective of the procedure is to re-allocate the 
display privileges from the least used Supplemental MMIDs to those 
members requesting Supplemental MMIDs.
---------------------------------------------------------------------------

    \16\ The Commission revised this sentence to clarify members 
would be ranked on the basis of their lowest volume, rather than 
least used, Supplemental MMID with display privileges. Telephone 
conversation between Peter R. Geraghty, Associate Vice President and 
Associate General Counsel, Nasdaq, and Ann E. Leddy, Special 
Counsel, Division, Commission (March 16, 2004).
---------------------------------------------------------------------------

    For example, assume with respect to security WXYZ member A has nine 
Supplemental MMIDs with display privileges (which is the maximum--1 
Primary MMID + 9 Supplemental MMIDs = 10 MMIDs with display 
privileges), member B has three Supplemental MMIDs with display 
privileges, and member C has three Supplemental MMIDs with display 
privileges and is requesting a fourth. After conducting the monthly 
ranking, one of B's Supplemental MMIDs is the least used Supplemental 
MMID in WXYZ, C has the next lowest volume Supplemental MMID with 
display privileges in the security, and A has the next lowest in the 
security after C (i.e., the order for forfeiting their display 
privilege is: B, C, then A). Based on this ranking, Nasdaq would re-
allocate one of B's display privileges to C. As a result, A keeps its 
privileges for all nine of its Supplemental MMIDs in WXYZ, C adds a 
Supplemental MMID with display privileges in the security, and B loses 
a display privilege in WXYZ--B does not lose use of the Supplemental 
MMID for submitting orders in WXYZ to SIZE, and it does not lose 
display privileges in any other security in which it is authorized to 
use the Supplemental MMID.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the Act, including section 15A(b)(6) of the Act,\17\ which requires, 
among other things, that a national securities association's rules be 
designed to promote just and equitable principles of trade, 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 mechanisms of a free and open market and a national market 
system, and, in general to protect investors and the public interest. 
Nasdaq believes that the proposed rule change is consistent with these 
requirements because it would facilitate transactions in securities, 
remove impediments to a free and open market, and protect investors by 
improving the transparency and efficiency of transactions. Nasdaq 
believes that increasing to ten the potential number of MMIDs with 
display privileges available to each market maker and ECN would provide 
members greater flexibility in how they route orders and quotes to 
SuperMontage from different units within their firms, including market 
making, arbitrage, retail, and institutional trading desks, among 
others. As a result, Nasdaq believes this proposal would benefit its 
market by enabling members to contribute more liquidity, add to the 
transparency of trading interest, and better serve the needs of 
investors.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

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.

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, if 
consistent with the protection of investors and the public interest, it 
has become effective pursuant to section 19(b)(3)(A) of the Act \18\ 
and Rule 19b-4(f)(6) thereunder.\19\ 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. Nasdaq will disseminate a Head Trader Alert informing members 
of the operative date of the proposal.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6). The Commission notes that Nasdaq 
provided written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change at least five business days prior to the date of filing of 
the proposed rule change.
---------------------------------------------------------------------------

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-2004-037. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your 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 No. SR-NASD-2004-037 and should be 
submitted by April 21, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-7149 Filed 3-30-04; 8:45 am]
BILLING CODE 8010-01-U