[Federal Register Volume 69, Number 96 (Tuesday, May 18, 2004)]
[Notices]
[Pages 28182-28185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-11177]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49669; File No. S7-24-89]


Joint Industry Plan; Notice of Filing and Summary Effectiveness 
of Amendment No.13C to 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.

May 7, 2004.

I. Introduction

    Pursuant to Rule 11Aa3-2\1\ and Rule 11Aa3-1\2\ under the 
Securities Exchange Act of 1934 (``Act'' or ``Exchange Act''), notice 
is hereby given that on April 22, 2004, the Cincinnati Stock Exchange, 
Inc. (``CSE'')\3\ 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 as ``Participants''), as members of the operating committee 
(``Operating Committee'' or ``Committee'')\4\ of the Plan submitted to 
the Securities and Exchange Commission (``SEC'' or ``Commission'') a 
proposal to amend the Plan (``Amendment 13C''). The proposal\5\ 
reflects several changes unanimously adopted by the Committee.\6\ The 
Commission is putting

[[Page 28183]]

into effect summarily Amendment 13C and publishing this notice to 
solicit comments from interested persons on Amendment 13C generally.
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    \1\ 17 CFR 240.11Aa3-2.
    \2\ 17 CFR 240.11Aa3-1.
    \3\ The Commission notes that the CSE recently changed its name 
to the National Stock Exchange, Inc. See Securities Exchange Act 
Release No. 48774 (November 12, 2003), 68 FR 65332 (November 19, 
2003) (File No. SR-CSE-2003-12).
    \4\ The Committee is made up of all the Participants.
    \5\ At the time Amendment 13C was approved by the Committee, 
Amendment 13A had been published in the Federal Register. See 
Securities Exchange Act Release No. 49137 (January 28, 2004), 69 FR 
5217 (February 3, 2004). The Operating Committee adopted Amendment 
13B, but agreed to hold the amendment pending resolution of the 
current status of the SIP selection process. The Operating Committee 
had reserved Amendment 14 for significant future modifications to 
the Plan that would, among other things, reflect changes in 
preparation for implementation of the new SIP. Accordingly, this 
amendment is numbered 13C.
    \6\ PCX and its subsidiary the Archipelago Exchange were elected 
co-chairs 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.
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II. Plan Background

    The Plan governs the collection, consolidation, and dissemination 
of quotation and transaction information for The Nasdaq Stock Market, 
Inc. (``Nasdaq'') National Market (``NNM'') and Nasdaq SmallCap 
securities listed on Nasdaq or traded on an exchange pursuant to 
unlisted trading privileges (``UTP'').\7\ The Plan provides for the 
collection from Plan Participants and the consolidation and 
dissemination to vendors, subscribers, and others of quotation and 
transaction information in ``eligible securities.''\8\
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    \7\ Section 12 of the Act generally requires an exchange to 
trade only those securities that the exchange lists, except that 
section 12(f) of the Act permits UTP under certain circumstances. 
For example, section 12(f) of the Act, among other things, permits 
exchanges to trade certain securities that are traded over-the-
counter (``OTC/UTP''), but only pursuant to a Commission order or 
rule. For a more complete discussion of the section 12(f) 
requirement, see November 1995 Extension Order, infra note 10.
    \8\ The Plan defines ``Eligible Securities'' as any NNM or 
Nasdaq SmallCap listed security, as defined in Nasdaq Rule 4200: (i) 
as to which UTP have been granted to a national securities exchange 
pursuant to section 12(f) of the Act; or (ii) which also is listed 
on a national securities exchange other than Nasdaq. Moreover, the 
definition states that ``Eligible Securities'' shall not include any 
security that is defined as an ``Eligible Security'' within section 
VII of the Consolidated Tape Association Plan.
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    The Commission originally approved the Plan on a pilot basis on 
June 26, 1990.\9\ The parties did not begin trading until July 12, 
1993, accordingly, the pilot period commenced on July 12, 1993. The 
Plan has since been in operation on an extended pilot basis.\10\
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    \9\ See Securities Exchange Act Release No. 28146, 55 FR 27917 
(July 6, 1990) (``1990 Plan Approval Order'').
    \10\ See Securities Exchange Act Release Nos. 34371 (July 13, 
1994), 59 FR 37103 (July 20, 1994); 35221 (January 11, 1995), 60 FR 
3886 (January 19, 1995); 36102 (August 14, 1995), 60 FR 43626 
(August 22, 1995); 36226 (September 13, 1995), 60 FR 49029 
(September 21, 1995); 36368 (October 13, 1995), 60 FR 54091 (October 
19, 1995); 36481 (November 13, 1995), 60 FR 58119 (November 24, 
1995) (``November 1995 Extension Order''); 36589 (December 13, 
1995), 60 FR 65696 (December 20, 1995); 36650 (December 28, 1995), 
61 FR 358 (January 4, 1996); 36934 (March 6, 1996), 61 FR 10408 
(March 13, 1996); 36985 (March 18, 1996), 61 FR 12122 (March 25, 
1996); 37689 (September 16, 1996), 61 FR 50058 (September 24, 1996); 
37772 (October 1, 1996), 61 FR 52980 (October 9, 1996); 38457 (March 
31, 1997), 62 FR 16880 (April 8, 1997); 38794 (June 30, 1997) 62 FR 
36586 (July 8, 1997); 39505 (December 31, 1997) 63 FR 1515 (January 
9, 1998); 40151 (July 1, 1998) 63 FR 36979 (July 8, 1998); 40896 
(December 31, 1998), 64 FR 1834 (January 12, 1999); 41392 (May 12, 
1999), 64 FR 27839 (May 21, 1999) (``May 1999 Approval Order''); 
42268 (December 23, 1999), 65 FR 1202 (January 6, 2000); 43005 (June 
30, 2000), 65 FR 42411 (July 10, 2000); 44099 (March 23, 2001), 66 
FR 17457 (March 30, 2001); 44348 (May 24, 2001), 66 FR 29610 (May 
31, 2001); 44552 (July 13, 2001), 66 FR 37712 (July 19, 2001); 44694 
(August 14, 2001), 66 FR 43598 (August 20, 2001); 44804 (September 
17, 2001), 66 FR 48299 (September 19, 2001); 45081 (November 19, 
2001), 66 FR 59273 (November 27, 2001); 44937 (October 15, 2001), 66 
FR 53271 (October 19, 2001); 46139 (June 28, 2001), 67 FR 44888 
(July 5, 2002); 46381 (August 19, 2002), 67 FR 54687 (August 23, 
2002); 46729 (October 25, 2002), 67 FR 66685 (November 1, 2002); 
48318 (August 12, 2003), 68 FR 49534 (August 18, 2003); and 48882 
(December 4, 2003), 68 FR 69731 (December 15, 2003).
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III. Description and Purpose of the Amendment

    As a result of aberrant pricing in trading of shares on December 5, 
2003, the Division of Market Regulation (``Division'') requested the 
Participants to provide better coordination among the self-regulatory 
organization (``SRO'') trading markets concerning SRO trading 
halts.\11\ The NASD, acting through its subsidiary, Nasdaq, proposed 
Amendment 13C to address changes to the Plan related to the 
coordination of instituting and lifting SRO trading halts. Amendment 
13C to the Plan reflects changes to the regulatory halt section that 
were unanimously approved by the Operating Committee. The proposed text 
of Amendment 13C is attached as Exhibit A. The following is a summary 
of the changes to the Plan proposed in Amendment 13C.
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    \11\ See letter from Annette L. Nazareth, Director, Division, 
Commission, to Bridget Farrell and Michael Roundtree, Co-
Chairpersons, Nasdaq UTP Operating Committee, dated December 9, 
2003.
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    1. Section III.T of the Plan provides for the definition of 
Regulatory Halt.\12\ Proposed Amendment 13C adds to the definition an 
``Extraordinary Market Regulatory Halt'' that is a trading halt due to 
extraordinary market activity as a result of system misuse or 
malfunction as further defined in a subsequent section of this 
Amendment.
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    \12\ The Plan currently defines ``Regulatory Halt'' as a trade 
suspension or halt called for the purpose of dissemination of 
material news, as described in Section X or that is called for where 
there are regulatory problems relating to an Eligible Security that 
should be clarified before trading is permitted to continue.
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    2. Section X of the Plan provides that the Primary Market\13\ 
declares Regulatory Halts. Proposed Amendment 13C replaces Primary 
Market with ``Listing Market'' which is defined as the Participant's 
Market on which a security is listed. In the case of dual listings, the 
Listing Market will be the Listing Market which has the highest number 
of the average of reported transactions and reported share volume for 
the preceding 12-month period as determined at the beginning of each 
calendar quarter.
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    \13\ The Plan currently defines ``Primary Market'' as Nasdaq, 
provided that if for any 12-month period the number of reported 
transactions and reported share volume in any other Participant's 
market exceeds 50% of the aggregated reported transactions and share 
volume, then that Participant's market shall be the Primary Market 
for such Eligible Security.
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    3. Proposed Amendment 13C clarifies that ``Participant'' for 
purposes of Section X includes the Nasdaq Stock Market despite the fact 
that Nasdaq is not currently a signatory to the Plan.
    4. Proposed Amendment 13C adds Section X.E, which establishes 
communication procedures to coordinate communication among Plan 
Participants in the instance of a trading halt. Specifically, the 
proposed Plan amendment introduces the use of the ``Hoot-n-Holler'' for 
communicating real-time information among Participants. Furthermore, 
the proposed amendment requires continuous monitoring of the Hoot-n-
Holler by all Participants during market hours. The proposed procedures 
in the instance of a Participant(s) experiencing extraordinary market 
activity in an Eligible Security include:
    a. Immediate notification over the Hoot-n-Holler;
    b. Best efforts to determine the source of the extraordinary market 
activity;
    c. An attempt by the Participant(s) to prevent quotes from a direct 
or indirect market participant from being transmitted to the Processor;
    d. If the problem is not rectified, the Participant(s) will cease 
transmitting quotes to the Processor in the affected security; and
    e. If within five minutes the problem is not rectified from the 
initial notification over the Hoot-n-Holler, or if decided earlier 
through unanimous approval from all Participants actively trading the 
affected security, the Listing Market based on facts and circumstances 
may declare over the Hoot-n-Holler an Extraordinary Market Regulatory 
Halt.
    5. The Plan has been amended to add Section X.F to clarify 
procedures for the resumption of trading after a Regulatory Halt. This 
includes a requirement that all Participants will use best efforts to 
indicate their intentions with respect to canceling or modifying trades 
within fifteen minutes of the declaration of the halt. Furthermore, the 
amendment clarifies that Participants will disseminate information 
regarding canceled or modified trades as soon as possible before the 
resumption of trading. Lastly, the Listing Market will

[[Page 28184]]

notify Participants over the Hoot-n-Holler when trading may resume.

IV. Date of Effectiveness of the Proposed Amendment

    The Commission has determined, pursuant to Rule 11Aa3-2(c)(4) under 
the Act,\14\ that the amendments detailed above in Amendment 13C will 
be effective upon publication of this notice of amendment in the 
Federal Register on a temporary basis not to exceed 120 days. The 
Commission finds that this action is necessary and appropriate in the 
public interest, for the protection of investors and the maintenance of 
fair and orderly markets, to remove impediments to, and perfect 
mechanisms of a national market system in furtherance of the purposes 
of the Act. The Commission believes that it is necessary and 
appropriate to put Amendment 13C into effect summarily because it will 
enhance investor protection by improving the coordination among SROs 
when instituting and lifting trading halts. The amendment should also 
further the maintenance of fair and orderly markets.
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    \14\ 17 CFR 240.11Aa3-2(c)(4).
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V. Solicitation of Comments

    The Commission seeks general comments on Amendment 13C. Interested 
persons are invited to submit written data, views, and arguments 
concerning the foregoing, including whether the proposed plan amendment 
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 an e-mail to [email protected]. Please include 
File Number S7-24-89 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 comment letters should refer to File No. S7-24-89. 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 Room. Amendment 13C is 
being published as Exhibit A to this proposal. Copies of the proposal 
will also be available for inspection and copying at the office of the 
Secretary of the Committee, currently located at Pacific Exchange, Inc. 
and Archipelago Exchange L.L.C. 100 South Wacker Drive, Suite 2000, 
Chicago, 60606. 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 No. S7-24-89 
and should be submitted on or before June 8, 2004.

    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)(27).
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Jill M. Peterson,
Assistant Secretary.

Exhibit A

    Additions are italicized, and deletions are in [brackets].

AMENDMENT NO. 13C 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

    AGREEMENT made as of the 15th day of December, 2003, by the 
undersigned registered national securities association and national 
securities exchanges (collectively referred to as the 
``Participants''), that are parties to the plan (``UTP Plan'' or 
``Plan'') submitted to the Securities and Exchange Commission 
(``Commission'').
    The parties agree as follows:
    1. Section III (Definitions), shall be amended to read as 
follows (deletions are in brackets and additions are in italics):

III. Definitions

    T. ``Regulatory Halt'' means a trade suspension or halt called 
for the purpose of dissemination of material news, as described at 
Section X hereof or that is called for where there are regulatory 
problems relating to an Eligible Security that should be clarified 
before trading therein is permitted to continue, including a trading 
halt for extraordinary market activity due to system misuse or 
malfunction under Section X.E.1. of the Plan (``Extraordinary Market 
Regulatory Halt'').
* * * * *
    2. Section X (Regulatory Halts), shall be amended to read as 
follows (deletions are in brackets and additions are in italics):

X. Regulatory Halts

    A. For purposes of this Section X, ``Participant'' shall include 
the Nasdaq Stock Market. Whenever, in the exercise of its regulatory 
functions, the [Primary] Listing Market for an Eligible Security 
determines that a Regulatory Halt is appropriate pursuant to Section 
III.T, the Listing Market will notify all other Participants 
pursuant to Section X.E and all other Participants shall also halt 
or suspend trading in that security until notification that the halt 
or suspension is no longer in effect. The [Primary] Listing Market 
shall immediately notify the Processor of such Regulatory Halt as 
well as notice of the lifting of a Regulatory Halt. The Processor, 
in turn, shall disseminate to Participants notice of the Regulatory 
Halt (as well as notice of the lifting of a regulatory halt) through 
the UTP Quote Data Feed. This notice shall serve as official notice 
of a regulatory halt for purposes of the Plan only, and shall not 
substitute or otherwise supplant notice that a Participant may 
recognize or require under its own rules. Nothing in this provision 
shall be read so as to supplant or be inconsistent with a 
Participant's own rules on trade halts, which rules apply to the 
Participant's own members. The Processor will reject any quotation 
information and monitor for transaction reports received from any 
Participant on an Eligible Security that has a Regulatory Halt in 
effect.
    B. Whenever the [Primary] Listing Market determines that an 
adequate publication or dissemination of information has occurred or 
the regulatory problem has been addressed so as to permit the 
termination of the Regulatory Halt then in effect, the [Primary] 
Listing Market shall promptly notify the Processor and each of the 
other Participants that conducts trading in such security pursuant 
to Section X.F. Except in extraordinary circumstances, adequate 
publication or dissemination shall be presumed by the [Primary] 
Listing Market to have occurred upon the expiration of one hour 
after initial publication in a national news dissemination service 
of the information that gave rise to the Regulatory Halt.
    C. Except in the case of a Regulatory Halt, the Processor shall 
not cease the dissemination of quotation or transaction information 
regarding any Eligible Security. In particular, it shall not cease 
dissemination of such information because of a delayed opening, 
imbalance of orders or other market-related problems involving such 
security. During a regulatory halt, the Processor shall collect and 
disseminate Transaction Information but shall cease collection and 
dissemination of all Quotation Information.
    D. For purposes of this Section X, [``Primary Market''] 
``Listing Market'' for an Eligible Security means [Nasdaq; provided, 
however, that if for any 12-month period the

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number of reported transactions and the reported share volume in an 
Eligible Security in any other Participant's Market exceeds 50% of 
the aggregate reported transactions and reported share volume of all 
Participants in such security, then that Participant's Market shall 
be the Primary Market for such Eligible Security.] the Participant's 
Market on which the Eligible Security is listed. If an Eligible 
Security is dually listed, Listing Market shall mean the 
Participant's Market on which the Eligible Security is listed that 
also has the highest number of the average of the reported 
transactions and reported share volume for the preceding 12-month 
period. The Listing Market for dually-listed Eligible Securities 
shall be determined at the beginning of each calendar quarter.
    E. For purposes of coordinating trading halts in Eligible 
Securities, all Participants are required to utilize the national 
market system communication media (``Hoot-n-Holler'') to verbally 
provide real-time information to all Participants. Each Participant 
shall be required to continuously monitor the Hoot-n-Holler system 
during market hours, and the failure of a Participant to do so at 
any time shall not prevent the Listing Market from initiating a 
Regulatory Halt in accordance with the procedures specified herein.
    1. The following procedures shall be followed when one or more 
Participants experiences extraordinary market activity in an 
Eligible Security that is believed to be caused by the misuse or 
malfunction of systems operated by or linked to one or more 
Participants.
    a. The Participant(s) experiencing the extraordinary market 
activity or any Participant that becomes aware of extraordinary 
market activity will immediately use best efforts to notify all 
Participants of the extraordinary market activity utilizing the 
Hoot-n-Holler system.
    b. The Listing Market will use best efforts to determine whether 
there is material news regarding the Eligible Security. If the 
Listing Market determines that there is non-disclosed material news, 
it will immediately call a Regulatory Halt pursuant to Section 
X.E.2.
    c. Each Participant(s) will use best efforts to determine 
whether one of its systems, or the system of a direct or indirect 
participant in its market, is responsible for the extraordinary 
market activity.
    d. If a Participant determines the potential source of 
extraordinary market activity pursuant to Section X.1.c., the 
Participant will use best efforts to determine whether removing the 
quotations of one or more direct or indirect market participants or 
barring one or more direct or indirect market participants from 
entering orders will resolve the extraordinary market activity. 
Accordingly, the Participant will prevent the quotations from one or 
more direct or indirect market participants in the affected Eligible 
Securities from being transmitted to the Processor.
    e. If the procedures described in Section X.E.1.a.-d. do not 
rectify the situation, the Participant(s) experiencing extraordinary 
market activity will cease transmitting all quotations in the 
affected Eligible Securities to the Processor.
    f. If the procedures described in Section X.E.1.a-e do not 
rectify the situation within five minutes of the first notification 
through the Hoot-n-Holler system, or if Participants agree to call a 
halt sooner through unanimous approval among those Participants 
actively trading impacted Eligible Securities, the Listing Market 
may determine based on the facts and circumstances, including 
available input from Participants, to declare an Extraordinary 
Market Regulatory Halt in the affected Eligible Securities. 
Simultaneously with the notification of the Processor to suspend the 
dissemination of quotations across all Participants, the Listing 
Market must verbally notify all Participants of the trading halt 
utilizing the Hoot-n-Holler system.
    g. Absent any evidence of system misuse or malfunction, best 
efforts will be used to ensure that trading is not halted across all 
Participants.
    2. If the Listing Market declares a Regulatory Halt in 
circumstances other than pursuant to Section X.E.1.f., the Listing 
Market must, simultaneously with the notification of the Processor 
to suspend the dissemination of quotations across all Participants, 
verbally notify all Participants of the trading halt utilizing the 
Hoot-n-Holler system.
    F. If the Listing Market declares a Regulatory Halt, trading 
will resume according to the following procedures:
    1. Within 15 minutes of the declaration of the halt, all 
Participants will make best efforts to indicate via the Hoot-n-
Holler their intentions with respect to canceling or modifying 
transactions.
    2. All Participants will disseminate to their members 
information regarding the canceled or modified transactions as 
promptly as possible, and in any event prior to the resumption of 
trading.
    3. After all Participants have met the requirements of Section 
X.F.1-2, the Listing Market will notify the Participants utilizing 
the Hoot-n-Holler and the Processor when trading may resume. Upon 
receiving this information, Participants may commence trading 
pursuant to Section X.A.
* * * * *
    This amendment to the UTP Plan will be effective when approved 
by the Commission.
    The parties may execute this Agreement in counterparts, no one 
of which need contain all signatures of all executing parties. As 
many of the counterparts as shall together contain all such 
signatures will constitute one and the same instrument.
    Except for the amendment contained herein, the UTP Plan is 
unchanged and remains in full force and effect.
    IN WITNESS WHEREOF, this Plan has been executed as of the -- day 
of December, 2003, by each of the Signatories hereto.
AMERICAN STOCK EXCHANGE, LLC
BY:--------------------------------------------------------------------

BOSTON STOCK EXCHANGE, INC.
BY:--------------------------------------------------------------------

CHICAGO STOCK EXCHANGE, INC.
BY:--------------------------------------------------------------------

THE CINCINNATI STOCK EXCHANGE
BY:--------------------------------------------------------------------

NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
BY:--------------------------------------------------------------------

PACIFIC EXCHANGE, INC.
BY:--------------------------------------------------------------------

PHILADELPHIA STOCK EXCHANGE, INC
BY:--------------------------------------------------------------------

[FR Doc. 04-11177 Filed 5-17-04; 8:45 am]
BILLING CODE 8010-01-P