[Federal Register Volume 70, Number 3 (Wednesday, January 5, 2005)]
[Notices]
[Pages 933-935]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-126]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50930; File No. SR-NASD-2004-182]


Self-Regulatory Organizations, National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change Regarding Minor 
Modifications to the Nasdaq Opening Process for Nasdaq-Listed Stocks

December 27, 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 December 13, 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 and 
II below, which items have been prepared by Nasdaq. Nasdaq has 
designated the proposed rule change as ``non-controversial'' under 
section 19(b)(3)(A)\3\ of the Act and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposed rule change effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is filing a proposed rule change to modify the process for 
calculating the Nasdaq Official Opening Price (``NOOP''). There is no 
new proposed rule language for this proposal.

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
    Nasdaq previously proposed to create two new voluntary opening 
processes--the Modified Opening Process and the Nasdaq Opening Cross--
that together constitute the beginning of the trading day for all 
Nasdaq-listed securities. The Commission approved that proposal on 
September 16, 2004.\5\ Nasdaq has

[[Page 934]]

identified a minor modification to the operation of the Nasdaq Opening 
Cross and Modified Opening Process that will improve the fair and 
orderly opening of the market in Nasdaq listed securities.
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    \5\ Securities Exchange Act Release No. 50405 (September 16, 
2004) 69 FR 57118 (September 23, 2004) (approving SR-NASD-2004-071). 
The Commission notes that Nasdaq made minor amendments to the 
Modified Opening Process and the Nasdaq Opening Cross as of October 
12, 2004, which were not reflected in this filing. The Commission 
has made changes to the filing to correct this oversight. See 
Securities Exchange Act Release No. 50602 (October 28, 2004), 69 FR 
64350 (November 4, 2004) (SR-NASD-2004-152).
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    Specifically, Nasdaq proposes to modify the process for calculating 
the NOOP. Currently, the NOOP is equal to the reported price of the 
first trade executed by the execution functionality of the Nasdaq 
Market Center based upon orders that are in queue when Nasdaq begins 
trading at 9:30 a.m. (``Opening Match'').\6\ If there is no Opening 
Match within fifteen seconds after the system opens at 9:30, the NOOP 
is based upon the first, last sale eligible trade that is submitted to 
the trade reporting functionality of the Nasdaq Market Center.
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    \6\ Securities Exchange Act Release No. 48997 (December 29, 
2003), 69 FR 716 (January 6, 2004) (approving SR-NASD-2003-161).
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    Nasdaq proposes to change from fifteen to sixty seconds the length 
of time Nasdaq will wait for an Opening Match within Nasdaq's execution 
functionality before looking for a last sale eligible trade submitted 
to Nasdaq's trade reporting functionality. If the system executes a 
trade sooner than sixty seconds, the NOOP will be calculated at that 
time rather than waiting the full sixty seconds. By waiting up to sixty 
seconds, Nasdaq increases the likelihood that, in non-cross eligible 
stocks, a Nasdaq market center execution as opposed to an internalized 
trade will serve as the NOOP. Nasdaq believes that this outcome is 
consistent with the Act, more consistently fulfills the purpose of 
adopting the NOOP, and better serves investors.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\7\ in general, and with 
section 15A(b)(6) of the Act,\8\ in particular, in that section 
15A(b)(6) requires the NASD's rules to be designed, among other things, 
to protect investors and the public interest. Nasdaq's current proposal 
is consistent with the NASD's obligations under these provisions of the 
Act because it will result in a more orderly opening for all Nasdaq 
stocks. The proposed rule change will create a fair, orderly, and 
unified opening for Nasdaq stocks, prevent the occurrence of locked and 
crossed markets in halted securities, and preserve price discovery and 
transparency that is vital to an effective opening of trading.
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    \7\ 15 U.S.C. 78o-3.
    \8\ 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 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

    Nasdaq neither solicited nor received written comments with respect 
to the proposed rule change.

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 \9\ and 
Rule 19b-4(f)(6), thereunder.\10\ 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.
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    \9\ 15 U.S.C. 78o-3.
    \10\ 15 U.S.C. 78o-3(b)(6). Nasdaq provided written notice of 
its intent to file the proposed rule change, along with a brief 
description and the text of the proposed rule change at least five 
business days before the date of filing of the proposed rule change.
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    Nasdaq has requested that the Commission waive the 30-day operative 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because it will allow Nasdaq to implement the proposed rule change 
which should help Nasdaq to maintain a fair and orderly market at the 
critical period of opening of trading. For this reason, the Commission 
designates the proposal to be effective and operative upon filing with 
the Commission.\11\
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    \11\ For purposes only of waiving the 30-day operative delay of 
the proposed rule change, the Commission considered the proposed 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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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 is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comments form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NASD-2004-182 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-2004-182. 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 Intenet Web site (http://www.sec.gov/rules/sro.html). 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 the 
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 SR-NASD-2004-182 and should be submitted on or before 
January 26, 2005.


[[Page 935]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 05-126 Filed 1-4-05; 8:45 am]
BILLING CODE 8010-01-M