[Federal Register Volume 69, Number 214 (Friday, November 5, 2004)]
[Notices]
[Page 64613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3019]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50606; File No. SR-NASD-2004-074]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Amendment No. 1 Thereto by the National Association of 
Securities Dealers, Inc. To Clarify and Modify Market Marker Quote Re-
Entry Obligations

October 29, 2004.
    On April 28, 2004, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), submitted to the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to NASD Rule 4620 to clarify and modify market 
maker quote re-entry obligations in the event that a quote is withdrawn 
by Nasdaq's systems because of a dividend application or a trading 
halt. On August 31, 2004, Nasdaq filed Amendment No. 1 to the proposed 
rule change. The Federal Register published the proposed rule change, 
as amended, for comment on September 21, 2004.\3\ The Commission 
received no comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 50372 (September 14, 
2004), 69 FR 56468 (``Notice'').
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    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
association.\4\ In particular, the Commission believes that the 
proposed rule change is consistent with Section 15A(b)(6) of the 
Act,\5\ which requires, among other things, that NASD's rules be 
designed 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. The Commission believes that the proposed rule change 
appropriately establishes the time frames by which market makers must 
re-enter two-sided quotations when quotes are withdrawn by Nasdaq's 
systems due to dividend applications and trading halts. The Commission 
notes that, under the proposal, if a market maker failed to enter a new 
quotation prior to the close of the regular market session on the day 
of the systems withdrawal or, generally, on the day when trading 
resumed following a trading halt,\6\ the market maker could be 
reinstated only when Nasdaq MarketWatch received a request from the 
market maker prior to the close of regular trading on the next day and 
Nasdaq MarketWatch determined that the market maker was not attempting 
to avoid its market making obligations by failing to re-enter a two-
sided quotation earlier.\7\
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    \4\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78o-3(b)(6).
    \6\ If the resumption of trading following a trading halt occurs 
when the market is not in regular session, the market maker would 
need to enter the new two-sided quotation prior to the opening of 
the next regular session.
    \7\ Nasdaq has stated that it will monitor market maker 
reactivation requests for any pattern of delays that might indicate 
that a market maker was attempting to avoid its obligations and in 
such cases will deny immediate reactivation and deem the market 
maker's registration in the security as having been voluntarily 
terminated. See Notice.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-NASD-2004-074) be, and it 
hereby is, approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E4-3019 Filed 11-4-04; 8:45 am]
BILLING CODE 8010-01-P