[Federal Register Volume 69, Number 153 (Tuesday, August 10, 2004)]
[Notices]
[Pages 48535-48539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18188]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50140; File No. SR-NASD-2004-097]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Multiple Market Participant 
Identifiers for Exchange Listed Securities

August 3, 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 June 25, 2004, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association''), 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 the 
Nasdaq. Nasdaq has filed this proposed rule change pursuant to Section 
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposal effective upon filing with the Commission. 
On July 29, 2004, Nasdaq filed Amendment No. 1 to the proposed rule 
change.\5\ 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ See letter from Mary M. Dunbar, Deputy General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated July 28, 2004. 
Amendment No. 1 makes technical amendments to the proposed rule 
change.
---------------------------------------------------------------------------

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

    Nasdaq proposes to provide market participants who execute 
transactions in exchange-listed securities \6\ through its systems the 
ability to display trading interest using up to ten individual MPIDs. 
The text of the proposed rule change is below. Proposed new language is 
italicized; proposed deletions are in brackets.\7\
---------------------------------------------------------------------------

    \6\ Exchange-listed securities include all CQS eligible 
securities and all securities eligible for trading via the 
Intermarket Trading System (``ITS'') and those included in NASD Rule 
5210(c) and NASD Rule 6410(d). See NASD Rule 4701(s).
    \7\ The proposed rule change is marked to show changes from the 
rule as it appears in the electronic NASD Manual available at 
www.nasdr.com.
---------------------------------------------------------------------------

* * * * *

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] MPID'') 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] MPID issued to a member pursuant to 
subparagraph (1) of this rule, or Rule 4623, shall be referred to as 
the member's ``Primary [MMID] MPID.'' For a six-month pilot period 
beginning March 1, 2004, market makers and ECNs may request the use of 
additional [MMIDs] MPIDs that shall be referred to as ``Supplemental 
[MMIDs] MPIDs.'' Market makers and ECNs may be issued up to nine 
Supplemental [MMIDs] MPIDs. A market maker may request the use of 
Supplemental [MMIDs] MPIDs 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 Supplemental [MMIDs] MPIDs 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

[[Page 48536]]

Primary [MMID] MPID in any security shall not be permitted to use a 
Supplemental [MMID] MPID for any purpose in that security.
    (3) [Members] Market makers and ECNs that are permitted the use of 
Supplemental [MMIDs] MPIDs 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' Supplemental [MMIDs] MPIDs; and (b) Supplemental [MMIDs] 
MPIDs 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 MPIDs

    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 Supplemental [MMIDs] MPIDs to be a 
privilege and not a right. Nasdaq has developed the following method 
for allocating the privilege of receiving and displaying Supplemental 
[MMIDs] MPIDs 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] MPID as a ``Primary [MMID] MPID'' and any 
additional [MMIDs] MPIDs as ``Supplemental [MMIDs] MPIDs.'' Market 
makers are required to use their Primary [MMID] MPID in accordance with 
the requirements of NASD Rule 4613(a)(1) above, as well as all existing 
requirements for the use of [MMIDs] MPIDs in Nasdaq systems. Market 
makers' use of Supplemental [MMIDs] MPIDs are 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 
Supplemental [MMIDs] MPIDs. Nasdaq will automatically designate each 
ECN's [MMIDs] MPIDs as Primary and Supplemental. Each ECN [MMID] MPID 
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 
Supplemental [MMIDs] MPIDs 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 Supplemental 
[MMIDs] MPIDs to display quotations in Nasdaq systems. If it is 
determined that one or more Supplemental [MMIDs] MPIDs are being used 
improperly, Nasdaq will withdraw its grant of the Supplemental [MMIDs] 
MPID(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] MPID (e.g., by being placed into an unexcused 
withdrawal), it may not use a Supplemental [MMID] MPID for any purpose 
in that security.
    The first priority of Nasdaq's method for allocating the privilege 
of displaying Supplemental [MMID] MPID is that each market maker or ECN 
should be permitted to register to display a single quotation in a 
security under a Primary [MMID] MPID before any is permitted to 
register to display additional quotations under Supplemental [MMIDs] 
MPIDs. If all requests for Primary MPIDs have been satisfied, Nasdaq 
will then register Supplemental [MMIDs] MPIDs 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 ten 
[MMIDs] MPIDs with display privileges of its maximum in a particular 
security, Nasdaq will temporarily cease registering Supplemental 
[MMIDs] MPIDs with display privileges in that security and reserve 
those ten remaining display privileges for members that may register 
their Primary [MMID] MPID in that stock in the future. If Nasdaq 
allocates those reserved display privileges to members requesting 
Primary [MMIDs] MPIDs and then receives additional requests for Primary 
[MMIDs] MPIDs, it will use the procedure described below to re-allocate 
display privileges to members requesting Primary [MMIDs] MPIDs.
    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 more than one 
Supplemental [MMID] MPID with display privileges in the stock according 
to their monthly volume of trading, based on the volume of that 
participant's least used Supplemental [MMID] MPID with display 
privileges. Nasdaq will withdraw the display privilege associated with 
the lowest volume Supplemental [MMID] MPID of the participant in that 
ranking and assign that privilege to the first member that requested a 
Primary [MMID] MPID or Supplemental [MMID] MPID, with Primary [MMIDs] 
MPIDs always taking precedence. Nasdaq will repeat this process as many 
times as needed to accommodate all pending requests for Primary and 
Supplemental [MMIDs] MPIDs. If after following this process (or at the 
outset of the allocation process) no member has more than one 
Supplemental [MMID] MPID with display privileges, members will be 
ranked based upon the volume associated with their Supplemental [MMID] 
MPID, and Nasdaq will withdraw the display privilege from the member 
with the lowest volume Supplemental [MMID] MPID.
    Members that lose the display privilege associated with a 
Supplemental [MMID] MPID will still be permitted to use the 
Supplemental [MMID] MPID to enter non-attributable orders into SIZE for 
that security or any other, and to display additional quotes in any 
stocks in which 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] MPIDs to those 
members requesting Primary or Supplemental [MMIDs] MPIDs. For example, 
assume with respect to security WXYZ member A has nine Supplemental 
[MMIDs] MPIDs with display privileges (which is the maximum - 1 Primary 
[MMID] MPID + 9 Supplemental [MMIDs] MPIDs = 10 [MMIDs] MPIDs with 
display privileges), member B has three Supplemental [MMIDs] MPIDs with 
display privileges, and member C has three Supplemental [MMIDs] MPIDs 
with display privileges and is requesting a fourth. After conducting 
the monthly ranking, one of B's Supplemental [MMIDs] MPIDs is the least 
used in WXYZ, C has the next lowest volume Supplemental [MMID] MPID 
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] MPIDs in WXYZ, C 
adds a Supplemental [MMID] MPID with display privileges in the 
security, and B

[[Page 48537]]

loses a display privilege in WXYZ - B does not lose use of the 
Supplemental [MMID] MPID 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] MPID.
* * * * *

5266. Market Participant Identifiers

    (a) ITS/CAES market makers obligated to maintain a continuous two-
sided quotation pursuant Rule 5220(e) shall have that quote displayed 
and attributed to them by a special market participant identifier 
(``MPID''). The first MPID issued to an ITS/CAES market maker shall be 
referred to as the ITS/CAES market maker's ``Primary MPID.''
    (b) For pilot period commencing June 24, 2004 and terminating 
September 31, 2004, ITS/CAES market makers may request the use of 
additional MPIDs that shall be referred to as ``Supplemental MPIDs.'' 
ITS/CAES market makers may be issued up to nine Supplemental MPIDs. An 
ITS/CAES market maker may request the use of Supplemental MPIDs for 
displaying two-sided Attributable Quotes/Orders in Nasdaq for any 
security in which it is registered and meets the obligations set forth 
in Rule 5220; an ITS/CAES market maker may not use a Supplemental MPID 
for displaying one-sided Attributable Quotes/Orders. An ITS/CAES market 
maker that fails to meet the obligations appurtenant to its Primary 
MPID in any security shall not be permitted to use a Supplemental MPID 
for any purpose in that security.
    (c) ITS/CAES market makers that are permitted the use of 
Supplemental MPIDs for displaying Attributable Quotes/Orders pursuant 
to subparagraph (b) of this rule are subject to the same rules 
applicable to the ITS/CAES market maker's first quotation, with two 
exceptions: (1) the continuous two-sided quote requirement and the need 
to obtain an excused withdrawal, or functional excused withdrawal, as 
described in Rule 5220(e), as well as the procedures described in Rule 
4710(b)(2)(B) and (b)(5), do not apply to ITS/CAES market makers' 
Supplemental MPIDs; and (2) Supplemental MPIDs may not be used by ITS/
CAES market makers to engage in passive market making or to enter 
stabilizing bids pursuant to NASD Rules 4614 and 4619.
* * * * *

IM-5266-1--Procedures For Allocation of Second Displayable MPIDs

    Nasdaq has a technological limitation on the number of displayed, 
attributable quotations in an individual security. Therefore, Nasdaq 
must consider the issuance and display of Supplemental MPIDs to be a 
privilege and not a right. Nasdaq has developed the following method 
for allocating the privilege of receiving and displaying Supplemental 
MPIDs with attributable display privileges (``display privileges'') in 
an orderly, predictable, and fair manner on a stock-by-stock basis.
    As described in Rule 5266, Nasdaq will automatically designate an 
ITS/CAES market maker's first MPID as a ``Primary MPID'' and any 
additional MPIDs as ``Supplemental MPIDs.'' ITS/CAES market makers are 
required to use their Primary MPID in accordance with the requirements 
of a Primary MPID for listed securities. Regardless of the number of 
MPIDs used, NASD members will trade exchange-listed securities using 
Nasdaq systems in compliance with all pre-existing NASD and SEC rules 
governing the trading of these securities--including the Intermarket 
System Plan and the Rule 5200 and 6300 Series. The multiple MPID for 
exchange-listed securities program creates no exceptions to these 
obligations. ITS/CAES market makers may also use Supplemental MPIDs 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 ITS/CAES market makers' use of both Primary and 
Supplemental MPIDs to display quotations in Nasdaq systems. If it is 
determined that one or more Supplemental MPIDs are being used 
improperly, Nasdaq will withdraw its grant of the Supplemental MPID(s) 
for all purposes for all securities. In addition, if an ITS/CAES market 
maker no longer fulfills the conditions appurtenant to its Primary MPID 
(e.g., by being placed into an unexcused withdrawal), it may not use a 
Supplemental MPID for any purpose in that security.
    The first priority of Nasdaq's method for allocating the privilege 
of displaying Supplemental MPID is that each ITS/CAES market maker 
should be permitted to register to display a single quotation in a 
security under a Primary MPID before any is permitted to register to 
display additional quotations under Supplemental MPIDs. If all requests 
for Primary MPIDs have been satisfied, Nasdaq will then register 
Supplemental MPIDs 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 ten MPIDs with display privileges 
of its maximum in a particular security, Nasdaq will temporarily cease 
registering Supplemental MPIDs with display privileges in that security 
and reserve those ten remaining display privileges for ITS/CAES market 
makers that may register their Primary MPID in that stock in the 
future. If Nasdaq allocates those reserved display privileges to ITS/
CAES market makers requesting Primary MPIDs and then receives 
additional requests for Primary MPIDs, it will use the procedure 
described below to re-allocate display privileges to ITS/CAES market 
makers requesting Primary MPIDs.
    For any stock in which Nasdaq has reached the maximum number of 
ITS/CAES market makers registered to display quotations, once each 
month, Nasdaq will rank each of the ITS/CAES market makers that has 
more than one Supplemental MPID with display privileges in the stock 
according to their monthly volume of trading, based on the volume of 
that ITS/CAES market maker's least used Supplemental MPID with display 
privileges. Nasdaq will withdraw the display privilege associated with 
the lowest volume Supplemental [MMID] MPID of the ITS/CAES market maker 
in that ranking and assign that privilege to the first ITS/CAES market 
maker that requested a Primary MPID or Supplemental MPID, with Primary 
MPIDs always taking precedence. Nasdaq will repeat this process as many 
times as needed to accommodate all pending requests for Primary and 
Supplemental MPIDs. If after following this process (or at the outset 
of the allocation process) no ITS/CAES market maker has more than one 
Supplemental MPID with display privileges, ITS/CAES market makers will 
be ranked based upon the volume associated with their Supplemental 
MPID, and Nasdaq will withdraw the display privilege from the ITS/CAES 
market maker with the lowest volume Supplemental MPID.
    ITS/CAES market makers that lose the display privilege associated 
with a Supplemental MPID will still be permitted to use the 
Supplemental MPID to enter non-attributable orders into SIZE for that 
security or any other, and to display additional quotes in stocks in 
which they are properly registered to do so, subject to the conditions 
described in the rule and this interpretive material.

[[Page 48538]]

    The objective of the procedure is to re-allocate the display 
privileges from the least used Supplemental MPIDs to those ITS/CAES 
market makers requesting Primary or Supplemental MPIDs. For example, 
assume with respect to security WXYZ ITS/CAES market maker A has nine 
Supplemental MPIDs with display privileges (which is the maximum - 1 
Primary MPID + 9 Supplemental MPIDs = 10 MPIDs with display 
privileges), ITS/CAES market maker B has three Supplemental MPIDs with 
display privileges, and ITS/CAES market maker C has three Supplemental 
MPIDs with display privileges and is requesting a fourth. After 
conducting the monthly ranking, one of B's Supplemental MPIDs is the 
least used in WXYZ, C has the next lowest volume Supplemental MPID 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 MPIDs in WXYZ, C adds a 
Supplemental MPID with display privileges in the security, and B loses 
a display privilege in WXYZ - B does not lose use of the Supplemental 
MPID 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 MPID.
* * * * *

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
    On March 1, 2004, Nasdaq submitted to the Commission SR-NASD-2004-
037, establishing the ability of ECNs and market makers in Nasdaq 
securities to use up to ten individual Market Participant Identifiers 
(``MPIDs'') to display attributable quotes and orders in the Nasdaq 
Quotation Montage.\8\ In this filing, Nasdaq proposes to create this 
same capability for ECNs and market makers using Nasdaq systems to 
quote and trade exchange-listed securities. MPIDs for exchange-listed 
securities will be allocated and re-allocated using the same procedures 
used for allocating MPIDs for Nasdaq securities when reaching 
technological limits for displayed, attributable MPIDs.\9\ Similar to 
the multiple MPID program for Nasdaq securities, any additional MPID 
for listed trading will be known as a ``Supplemental MPID'' with a 
market maker's or ECN's first MPID being known as the ``Primary MPID.''
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 49471 (March 25, 
2004), 69 FR 17006 (March 31, 2004). In that filing, Nasdaq referred 
to these identifiers as ``MMIDs.'' In order to ensure consistency 
across all its rules, Nasdaq is amending the rules to refer to them 
by the acronym ``MPID.''
    \9\ Under those procedures, rankings are based only on the 
volume associated with a member's Supplemental MPID--Primary MPIDs 
will be excluded from the calculation. The member with lowest volume 
using a Supplemental MPID will continue to be the first to lose the 
display privilege, but only with respect to the Supplemental MPID 
that caused them to have the lowest ranking; the member will not 
lose its authority to use the Supplemental MPID in that security to 
submit quotes and orders to SIZE or the display privileges 
associated with that Supplemental MPID with respect to other 
securities in which it is permitted to use the identifier. When re-
allocating the display privileges, requests for Primary MPIDs will 
continue to receive precedence over requests for Supplemental MPIDs.
---------------------------------------------------------------------------

    Nasdaq believes that the purpose of providing additional MPIDs for 
firms trading exchange-listed securities in Nasdaq systems is to 
provide quoting market participants a better ability to organize and 
manage diverse order flows from their customers and to route orders and 
quotes to Nasdaq's listed trading facilities from different units/
desks. According to Nasdaq, to the extent that this flexibility 
provides increased incentives to provide liquidity to Nasdaq systems, 
all market participants can be expected to benefit.\10\
---------------------------------------------------------------------------

    \10\ Nasdaq will assess no fees for the issuance or use of a 
Supplemental MPIDs for listed securities other than the Commission-
approved transaction fees set forth in NASD Rule 7010.
---------------------------------------------------------------------------

    The restrictions on the use of any Supplemental MPID are the same 
as those applicable to a Primary MPID for exchange-listed securities. 
Regardless of the number of MPIDs used, NASD members will trade 
exchange-listed securities using Nasdaq systems in compliance with all 
pre-existing NASD and Commission rules governing the trading of these 
securities--including the Intermarket Trading System (``ITS'') Plan and 
NASD Rule 5200 and 6300 Series. Nasdaq believes that the multiple MPID 
for exchange-listed securities programs creates no exceptions to these 
obligations. In particular, ITS/CAES market makers may not use 
Supplemental MPIDs to trade-through the quotes of other ITS Plan 
participants, and Supplemental MPIDs are subject to the provisions of 
NASD Rule 5263 governing locked and crossed markets. Similarly, the 
rights attaching to quotations displayed by registered ITS/CAES market 
makers using a Supplemental MPID are the same as those of the primary 
quotations of such market makers--including protection from trade-
throughs by other ITS Plan participants.
    The granting of Supplemental MPIDs for exchange-listed securities 
is secondary to the integrity of the Nasdaq system trading those 
issues. As such, ECNs and market makers may not use a Supplemental 
MPID(s) to accomplish indirectly what they would be prohibited from 
doing directly through a single MPID. According to Nasdaq, to the 
extent that the allocation of Supplemental MPIDs creates regulatory 
confusion or ambiguity, every inference will be drawn against the use 
of Supplemental MPIDs in a manner that would diminish the quality or 
rigor of the regulation of the Nasdaq market. Accordingly, if Nasdaq 
determines that a Supplemental exchange-listed MPID is being used 
improperly, it will withdraw its grant of the Supplemental exchange-
listed MPID for all purposes for all securities.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\11\ in general and with 
Section 15A(b)(6) of the Act,\12\ 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 a free 
and open market and a national market system, and, in general, to 
protect investors and the public interest. In particular, Nasdaq 
believes that the use of multiple MPIDs in listed securities can be 
expected to provide greater flexibility in the processing of diverse 
orders flows, thereby improving overall system liquidity for the 
benefit of all market participants.\13\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78o-3.
    \12\ 15 U.S.C. 78o-3(b)(6).
    \13\ The NASD has represented to the Commission that the use of 
multiple MPIDs by member firms in connection with the trading of 
exchange-listed securities will not have a negative effect on NASD's 
ability to oversee the activity of its members trading exchange-
listed securities. Telephone conversation among Stephen Luparello, 
Executive Vice President, Kathleen O'Mara, Associate General 
Counsel, NASD and Katherine England, Assistant Director, Ira 
Brandriss, Assistant Director, and Ian Patel, Attorney, Division, 
Commission on July 16, 2004.

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

[[Page 48539]]

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 \14\ 
and Rule 19b-4(f)(6) thereunder.\15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    Nasdaq has requested that the Commission waive the 30-day operative 
period and allow Nasdaq to institute this proposal immediately. Nasdaq 
believes that such waiver of the 30-day period will enable the pilot to 
run for a reasonable time before expiring on September 31, 2004, the 
termination date for Nasdaq's MPID pilot for attributable quotes and 
orders in the Nasdaq Quotation Montage. The Commission has determined 
that good cause exists to waive the 30-day period. Allowing Nasdaq to 
institute the pilot immediately should permit Nasdaq sufficient time to 
evaluate the efficacy of the pilot prior to its scheduled termination 
on September 31, 2004.
    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the proposed 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 proposed rule change. 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 SR-NASD-2004-097 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 SR-NASD-2004-097. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of 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 
SR-NASD-2004-097 and should be submitted on or before August 31, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(A)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-18188 Filed 8-9-04; 8:45 am]
BILLING CODE 8010-01-P