[Federal Register Volume 69, Number 82 (Wednesday, April 28, 2004)]
[Notices]
[Pages 23244-23246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9629]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49597; File No. SR-NASD-2004-051]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change and Amendments No. 1 and No. 2 
Thereto by the National Association of Securities Dealers, Inc. 
Relating to the Use of Summary Orders for NNMS Order-Delivery ECNs 
Using the SIZE MPID in SuperMontage

April 21, 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 23, 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. On April 9, 
2004, Nasdaq filed Amendment No. 1 to the proposed rule change,\3\ and 
on April 19, 2004, Nasdaq filed Amendment No. 2 to the proposed rule 
change.\4\ 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 (``Division''), Commission, 
dated April 8, 2004 (``Amendment No. 1''). Amendment No. 1 replaced 
the originally filed proposal in its entirety. This Amendment No. 1 
also replaced and superceded an earlier Amendment filed by Nasdaq, 
also marked Amendment No. 1, dated March 26, 2004. Telephone 
conversation between Thomas P. Moran, Associate General Counsel, 
Nasdaq, and A. Michael Pierson, Attorney, Division, Commission on 
March 26, 2004.
    \4\ See letter from Edward S. Knight, Executive Vice President 
and General Counsel, Nasdaq, to Katherine A. England, Assistant 
Director, Division, Commission, dated April 16, 2004 (``Amendment 
No. 2''). Amendment No. 2 replaced Amendment No. 1 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 provide those NNMS Order-Delivery ECNs 
participating in SuperMontage with an order type (Summary Orders) that 
will generate a warning message if an un-attributed order they enter 
into the system would lock or cross the best bid or best offer 
displayed in Nasdaq. Pursuant to section 19(b)(3)(A) of the Act \5\ and 
Rule 19b-4(f)(6) thereunder,\6\ Nasdaq has designated the proposed rule 
change as non-controversial and one effecting a change that: (1) Does 
not significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) will not become operative for at least thirty days after the 
date of this filing.\7\ Nasdaq intends to implement the proposed rule 
change on or about July 17, 2004,\8\ and will inform market 
participants of the exact implementation date via a Head Trader Alert 
on http://www.nasdaqtrader.com.
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    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(f)(6).
    \7\ On March 9, 2004, Nasdaq provided Commission staff with a 
description and text of the proposed rule change.
    \8\ Telephone conversation between Thomas P. Moran, Associate 
General Counsel, Nasdaq, and A. Michael Pierson, Attorney, Division, 
Commission on April 21, 2004.
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    Below is the text of the proposed rule change, as amended. Proposed 
new language is in italic; proposed deletions are in [brackets].
* * * * *
4700. NASDAQ NATIONAL MARKET EXECUTION SYSTEM (NNMS)
4701. Definitions
    Unless stated otherwise, the terms described below shall have the 
following meaning:
    (a)-(nn) No Change.
    (oo) [Reserved] The term ``Summary'' shall mean, for priced limit 
orders so designated, that if an order is marketable upon receipt by 
NNMS, it shall be rejected and returned to the entering party. Summary 
Orders may only be entered by NNMS Order Delivery ECNs. Summary Orders 
may only be designated as Non-Attributable Orders.
* * * * *
4706. Order Entry Parameters
    (a) Non-Directed Orders--
    (1) General. The following requirements shall apply to Non-Directed 
Orders Entered by NNMS Market Participants:
    (A) No Change.
    (B) A Non-Directed Order must be a market or limit order, must 
indicate whether it is a buy, short sale, short-sale exempt, or long 
sale, and may be designated as ``Immediate or Cancel,'' ``Day,'' 
``Good-till-Cancelled,'' ``Auto-Ex,'' ``Fill or Return,'' ``Pegged,'' 
``Discretionary,'' ``Sweep,'' ``Total Day,'' ``Total Good till 
Cancelled,'' [or] ``Total Immediate or Cancel,'' or ``Summary.''
    (1) through (12) No Change.
    (13) An order may be designated as ``Summary,'' in which case the 
order

[[Page 23245]]

shall be designated either as Day or GTC. A Summary Order that is 
marketable upon receipt by NNMS shall be rejected and returned to the 
entering party. If not marketable upon receipt by NNMS, it will be 
retained by NNMS. Summary Day and GTC orders may be executed prior to 
the market open if required under Rule 4710(b)(3)(B). Summary Orders 
may only be entered by NNMS Order Delivery ECNs. Summary Orders may 
only be designated as Non-Attributable Orders.
    (C)-(F) No Change.
    (2) No Change.
    (A) through (B) No Change.
    (b)-(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, as 
amended, and discussed any comments it received on the proposed rule 
change, as amended. 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 the adoption of a new voluntary order type for 
the use of NNMS Order-Delivery ECNs participating in SuperMontage. 
Called a Summary Order (``SO''), the order type is intended to provide 
NNMS Order-Delivery ECNs the ability to receive a warning message if an 
un-attributed order entered by them for display under the SIZE MPID in 
the montage is marketable and would lock or cross the best bid or best 
offer in NNMS. NNMS Order-Delivery ECNs already receive such lock/cross 
warnings when they enter attributable quotes/orders into the system and 
the proposed order type is designed to provide the same functionality 
for un-attributed orders that NNMS Order-Delivery ECNs enter into 
SIZE.\9\ As such, the order type should give NNMS Order-Delivery ECNs 
an equal ability to manage risk when using either attributed or un-
attributed orders. SOs, which may only be designated as DAY or Good-
Till-Cancelled (``GTC'') would be retained by the system and processed 
in the normal course if they would not lock/cross the best bid or offer 
in NNMS. Retained SOs would be made available for execution, if 
required, as part of Nasdaq's pre-opening unlocking and uncrossing 
process.
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    \9\ SuperMontage's SIZE feature only accepts orders.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change, as amended, is 
consistent with the provisions of section 15A of the Act,\10\ in 
general, and section 15A(b)(6) of the Act,\11\ 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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    \10\ 15 U.S.C. 78o-3.
    \11\ 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.

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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act,\12\ and subparagraph (f)(6) of Rule 19b-4,\13\ 
thereunder because it does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; (iii) become operative for 30 days from the date on 
which it was filed. 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.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ For purposes of calculating the 60-day abrogation period, 
the Commission considers the proposed rule change to have been filed 
on April 19, 2004, the date Nasdaq filed Amendment No. 2.
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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. Comments may be 
submitted by any of the following methods:
    Electronic comments:
     Use the Commission's Internet comment form 
(http://www.sec.gov/rules/sro.shtml); or
     Send e-mail to [email protected]. Please 
include File Number NASD-2003-051 on the subject line.
    Paper comments:
     Send paper comments in triplicate to Jonathan G. 
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, 
NW., Washington, DC 20549-0609.
    All submissions should refer to File Number NASD-2003-051. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
NASD. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number NASD-
2003-051 and should be submitted on or before May 19, 2004.


[[Page 23246]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 04-9629 Filed 4-27-04; 8:45 am]
BILLING CODE 8010-01-P