[Federal Register Volume 70, Number 45 (Wednesday, March 9, 2005)]
[Notices]
[Pages 11719-11720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-984]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51292; File No. S7-24-89]


Joint Industry Plan; Order Extending for One Year 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

 March 2, 2005.

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\ On December 14, 2004, the 
Commission issued a notice for comment and simultaneously granted 
summary effectiveness to the request to extend the operation of the 
Plan and certain exemptive relief on a temporary basis not to exceed 
120 days from December 21, 2004.\4\ No comments were received in 
response to the publication of this notice.
---------------------------------------------------------------------------

    \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.
    \4\ See Securities Exchange Act Release No. 50855, 69 FR 76499 
(December 21, 2004).
---------------------------------------------------------------------------

    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 
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. The Plan is operating subject to a temporary 
extension.
    This order approves, pursuant to Rule 11Aa3-2(c)(2) under the 
Securities Exchange Act of 1934 (``Act''),\5\ the request to extend 
operation of the Plan, as modified by all changes previously approved, 
and the request to extend certain exemptive relief for a one-year 
period expiring on December 21, 2005.
---------------------------------------------------------------------------

    \5\ 17 CFR 240.11Aa3-2(c)(2).
---------------------------------------------------------------------------

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, potentially in 
conflict with Rule 11Aa3-2(d) under the Act.\8\
---------------------------------------------------------------------------

    \6\ Section VI.C.1. of the Plan, as approved 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). Rule 11Aa3-2(d) under the Act 
requires a self-regulatory organization participant of national 
market system plan to comply with the terms of that plan.
---------------------------------------------------------------------------

    As discussed at length in the notice of the 13th Amendment,\9\ the 
Commission determined to relieve the potential conflict among the 
SuperMontage approval order,\10\ Rule 11Aa3-2,\11\ and 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 the exemptive relief.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 46139 (June 28, 2001 
[sic]), 67 FR 44888 (July 5, 2002).
    \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).
---------------------------------------------------------------------------

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 * * *

[[Page 11720]]

between exchange markets and markets other than exchange markets.'' 
\17\ When the Commission first approved of 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    The Commission finds that extending the operation of the Plan for a 
year 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 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 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 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\ 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Sections 12(f) and 11A of the 
Act \23\ and paragraph (c)(4) of Rule 11Aa3-2 \24\ thereunder, that the 
operation of the Plan be, and hereby is, extended and that certain 
exemptive relief also be extended until December 21, 2005.
---------------------------------------------------------------------------

    \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\
Margaret H. McFarland,
Deputy Secretary.
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(27).
---------------------------------------------------------------------------

[FR Doc. E5-984 Filed 3-8-05; 8:45 am]
BILLING CODE 8010-01-P