[Federal Register Volume 69, Number 244 (Tuesday, December 21, 2004)]
[Notices]
[Pages 76499-76500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3762]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50855; File No. S7-24-89]


Joint Industry Plan; Solicitation of Comments and Order Granting 
Summary Effectiveness To Request To Extend the Operation of the 
Reporting Plan for Nasdaq-Listed Securities Traded on Exchanges on an 
Unlisted Trading Privilege Basis, Submitted by the Pacific Exchange, 
Inc., the National Association of Securities Dealers, Inc., the 
American Stock Exchange LLC, the Boston Stock Exchange, Inc., the 
Chicago Stock Exchange, Inc., the Cincinnati Stock Exchange, Inc., and 
the Philadelphia Stock Exchange, Inc. and To Extend Certain Exemptive 
Relief

December 14, 2004.

I. Introduction and Description

    On December 14, 2004, the Pacific Exchange, Inc. (``PCX'') 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 Cincinnati Stock Exchange, Inc. (``CSE''),\1\ and the 
Philadelphia Stock Exchange, Inc. (``PHLX'') (hereinafter referred to 
collectively as ``Participants''),\2\ as members of the operating 
committee (``Operating Committee'' or ``Committee'') of the Plan 
submitted to the Securities and Exchange Commission (``Commission'') a 
request to extend the operation of the Plan and also to extend certain 
exemptive relief as described below.\3\
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    \1\ The Commission notes that the CSE 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).
    \2\ PCX and its subsidiary the Archipelago Exchange were elected 
co-chairs of the operating committee (``Operating Committee'' or 
``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.
    \3\ See letter from Bridget M. Farrell, Co-Chairman, and Michael 
P. Rountree, Co-Chairman, Plan Operating Committee, to Jonathan G. 
Katz, Secretary, Commission, dated December 14, 2004.
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    The Nasdaq UTP Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation and last sale 
information for each of its Participants. This consolidated information 
informs investors of the current quotation and recent trade prices of 
The Nasdaq Stock Market, Inc. (``Nasdaq'') securities. It enables 
investors to ascertain from one data source the current prices in all 
the markets trading Nasdaq securities. The Plan serves as the required 
transaction reporting plan for its Participants, which is a 
prerequisite for their trading Nasdaq securities. Currently, the Plan 
is scheduled to expire on December 15, 2004.
    This order grants summary effectiveness, pursuant to Rule 11Aa3-
2(c)(4) under the Securities Exchange Act of 1934 (``Act''),\4\ to the 
request to extend operation of the Plan, as modified by all changes 
previously approved, and to the request to extend certain exemptive 
relief (``Date Extension''). Pursuant to Rule 11Aa3-2(c)(4) under the 
Act,\5\ the Date Extension will be effective summarily upon publication 
in the Federal Register on temporary basis not to exceed 120 days.
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    \4\ 17 CFR 240.11Aa3-2(c)(4).
    \5\ 17 CFR 240.11Aa3-2(c)(4).
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II. Exemptive Relief

    While both Nasdaq and the NASD operate under the umbrella of a 
single Plan Participant, the submission of two distinct best bids and 
offers (``BBOs'') could be deemed inconsistent with Section VI.C.1 of 
the Plan.\6\ Pursuant to the 13th Amendment of the Plan and Rule 11Aa3-
2(a),\7\ Nasdaq cannot be granted Plan Participant status until it is 
registered as a national securities exchange. While Nasdaq submits a 
distinct BBO from the NASD and until Nasdaq is registered as a national 
securities exchange, the NASD will submit quotes to the Plan's 
Securities Information Processor (``SIP'') in a manner different than 
specified in Section VI.C.1. of the Plan and, thus, in conflict with 
Commission Rule 11Aa3-2(d).\8\
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    \6\ Section VI.C.1. of the Plan, as approved by the Operating 
Committee in the 13th Amendment, states that ``[t]he Processor shall 
disseminate on the UTP Quote Data Feed the best bid and offer 
information supplied by each Participant, including the NASD. * * 
*''
    \7\ 17 CFR 240.11Aa3-2(a).
    \8\ 17 CFR 240.11Aa3-2(d). Commission Rule 11Aa3-2(d) requires a 
self-regulatory organization participant of national market system 
plan to comply with the terms of that plan.
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    As discussed at length in the notice of the 13th Amendment,\9\ the 
Commission had determined to relieve the potential conflict among the 
SuperMontage approval order,\10\ Rule 11Aa3-2,\11\ and

[[Page 76500]]

the Plan, by granting the NASD an exemption under Rule 11Aa3-2(f) \12\ 
from compliance with Section VI.C.1. of the Plan as required by Rule 
11Aa3-2(d) \13\ until such time as Nasdaq is registered as a national 
securities exchange. The Plan Participants have requested an extension 
of such exemptive relief.
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    \9\ See Securities Exchange Act Release No. 46139 (June 28, 
2001), 67 FR 44888 (July 5, 2002) (``13th Amendment Notice'').
    \10\ See Securities Exchange Act Release No. 43863 (January 19, 
2001), 66 FR 8020 (January 26, 2001).
    \11\ 17 CFR 240.11Aa3-2.
    \12\ 17 CFR 240.11Aa3-2(f).
    \13\ 17 CFR 240.11Aa3-2(d).
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III. Discussion

    The Commission finds that extending the operation of the Plan is 
consistent with the requirements of the Act and the rules and 
regulations thereunder, and, in particular, Section 12(f) \14\ and 
Section 11A(a)(1) \15\ of the Act and Rules 11Aa3-1 and 11Aa3-2 
thereunder.\16\ Section 11A of the Act directs the Commission to 
facilitate the development of a national market system for securities, 
``having due regard for the public interest, the protection of 
investors, and the maintenance of fair and orderly markets,'' and cites 
as an objective of that system the ``fair competition * * * between 
exchange markets and markets other than exchange markets.''\17\ When 
the Commission first approved the Plan on a pilot basis, it found that 
the Plan ``should enhance market efficiency and fair competition, avoid 
investor confusion, and facilitate surveillance of concurrent exchange 
and OTC trading.'' \18\ The Plan has been in existence since 1990 and 
Participants have been trading Nasdaq securities under the Plan since 
1993.
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    \14\ 15 U.S.C. 78l(f). The Commission finds that extending the 
Plan is consistent with fair and orderly markets, the protection of 
investors and the public interest, and otherwise in furtherance of 
the purposes of the Act. The Commission has taken into account the 
public trading activity in securities traded pursuant to the Plan, 
the character of the trading, the impact of the trading of such 
securities on existing markets, and the desirability of removing 
impediments to, and the progress that has been made toward the 
development of a national market system.
    \15\ 15 U.S.C. 78k-1(a)(1).
    \16\ 17 CFR 240.11Aa3-1 and 17 CFR 240.11Aa3-2.
    \17\ 15 U.S.C. 78k-1(a).
    \18\ See Securities Exchange Act Release No. 28146 (June 26, 
1990), 55 FR 27917 (July 6, 1990).
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    The Commission finds that extending the operation of the Plan 
through summary effectiveness furthers the goals described above by 
preventing the lapsing of the sole effective transaction reporting plan 
for Nasdaq securities traded by exchanges pursuant to unlisted trading 
privileges. The Commission believes that the Plan is currently a 
critical component of the national market system and that the Plan's 
expiration would have a serious, detrimental impact on the further 
development of the national market system.
    The Commission also finds that it is appropriate to grant summary 
effectiveness to the request to extend the exemption under Rule 11Aa3-
2(f) \19\ from compliance with Section VI.C.1. of the Plan as required 
by Rule 11Aa3-2(d).\20\ The Commission believes that the Plan is a 
critical component of the national market system and that the requested 
exemptive relief is necessary to assure the effective operation of the 
Plan. The Commission believes that the requested exemptive relief 
extension is consistent with the Act, the Rules thereunder, and, 
specifically, with the objectives set forth in Sections 12(f) and 11A 
of the Act \21\ and Rules 11Aa3-1 and 11Aa3-2 thereunder.\22\
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    \19\ 17 CFR 240.11Aa3-2(f).
    \20\ 17 CFR 240.11Aa3-2(d).
    \21\ 15 U.S.C. 78l(f) and 15 U.S.C. 78k-1.
    \22\ 17 CFR 240.11Aa3-1 and 11Aa3-2.
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IV. Solicitation of Comments

    The Commission seeks general comments on the extension of the 
operation of the Plan and the extension of exemptive relief. Interested 
persons are invited to submit written data, views, and arguments 
concerning the foregoing, including whether the proposal 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 amendment that are 
filed with the Commission, and all written communications relating to 
the proposal 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 the amendment will also 
be available for inspection and copying at the Office of the Secretary 
of the Committee, currently located at the at Pacific Exchange, Inc. 
and Archipelago Exchange L.L.C. 100 South Wacker Drive, Suite 2000, 
Chicago, 60606. All submissions should refer to File No S7-24-89 and be 
submitted on or before January 11, 2005.

V. Conclusion

    It is therefore ordered, pursuant to Sections 12(f) and 11A of the 
Act \23\ and paragraph (c)(4) of Rule 11Aa3-2 thereunder,\24\ that the 
operation of the Plan, as modified by all changes previously approved, 
be, and hereby is, extended and that certain exemptive relief also be 
extended both for a period not to exceed 120 days from the date of 
publication of this Date Extension in the Federal Register.
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    \23\ 15 U.S.C. 78l(f) and 15 U.S.C. 78k-1.
    \24\ 17 CFR 240.11Aa3-2(c)(4).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(27).
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Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E4-3762 Filed 12-20-04; 8:45 am]
BILLING CODE 8010-01-P