[Federal Register Volume 70, Number 55 (Wednesday, March 23, 2005)]
[Notices]
[Pages 14739-14740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1255]



[[Page 14739]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51382; File No. SR-NASD-2005-029]


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

March 16, 2005.
    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 March 4, 2005, 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) of the Act \3\ 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 NASD Rule 
4704(d)(1) which governs the dissemination of the Order Imbalance 
Indicator prior to the Nasdaq Opening Cross. The text of the proposed 
rule change is set forth below. Proposed new language is in italics; 
proposed deletions are in [brackets].\5\
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    \5\ The proposed rule change is marked to show changes from the 
rule text appearing in the NASD Manual available at https://www.nasd.com.
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* * * * *

Rule 4704 Opening Process for Nasdaq-listed Securities

    (a)-(c) No Change.
    (d) Processing of Nasdaq Opening Cross. For certain Nasdaq-listed 
securities designated by Nasdaq, the Nasdaq Opening Cross shall occur 
at 9:30, and regular hours trading shall commence when the Nasdaq 
Opening Cross concludes.
    (1) Beginning at 9:25 [9:28] a.m., Nasdaq shall disseminate by 
electronic means an Order Imbalance Indicator every 15 seconds until 
9:29, and then every 5 seconds until market open. The Order Imbalance 
Indicator shall contain the following real time information:
    (A)-(E) No Change.
    (2)-(4) No Change.
* * * * *

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 is proposing to modify NASD Rule 4704(d)(1) which governs 
the dissemination of the Order Imbalance Indicator prior to the Nasdaq 
Opening Cross. NASA Rule 4704(d)(1) currently provides that Nasdaq will 
disseminate the Order Imbalance Indicator every 15 seconds beginning at 
9:28 a.m. and every 5 seconds beginning at 9:29 a.m. until market open. 
The Order Imbalance Indicator informs market participants about the 
expected outcome of the Nasdaq Opening Cross and enables them to 
determine how to participate in it.
    Nasdaq has determined that disseminating the Order Imbalance 
Indicator beginning at 9:25 a.m. would enhance market transparency and 
encourage increased order interaction during the Nasdaq Opening Cross. 
Currently, Nasdaq's system opens all quotes and orders at 9:25 a.m. but 
there is no dissemination of information regarding the status of the 
market until 9:28 a.m. Nasdaq believes that disseminating the Order 
Imbalance Indicator at 9:25 a.m. would permit market participants to 
make earlier and better informed decisions about how they will 
participate in the Nasdaq Opening Cross which would, in turn, improve 
the fair and orderly opening of the market. There would be no changes 
in the entry, display, processing, or execution of individual orders.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\6\ in general, and with 
section 15A(b)(6) of the Act,\7\ in particular, in that section 
15A(b)(6) requires that the NASD's rules be designed to protect 
investors and the public interest. Nasdaq believes that its current 
proposal is consistent with the NASD's obligations under these 
provisions of the Act because it would result in a more orderly opening 
for all Nasdaq stocks. The proposed rule change would 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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    \6\ 15 U.S.C. 78o-3.
    \7\ 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 would 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 \8\ and 
Rule 19b-4(f)(6) thereunder.\9\ Nasdaq has requested that the 
Commission waive the 30-day operative delay for ``non-controversial'' 
proposals, based upon a representation that the proposal is of the 
utmost importance to

[[Page 14740]]

the fair and orderly operation of The Nasdaq Stock Market during the 
pre-opening trading period. The Commission believes that waiver of the 
30-day operative delay is consistent with the protection of investors 
and the public interest because it will allow Nasdaq to begin 
disseminating the Order Imbalance Indicator at the earlier 9:25 a.m. 
time immediately, thereby providing increased information and greater 
transparency to the market. For this reason, the Commission designates 
the proposal to be effective and operative upon filing with the 
Commission.\10\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). The Commission notes that Nasdaq 
provided written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change at least five business days prior to the date of filing of 
the proposed rule change.
    \10\ 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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    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.

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 comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NASD-2005-029 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-2005-029. 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 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-2005-029 and should be submitted on or before April 
13, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1255 Filed 3-22-05; 8:45 am]
BILLING CODE 8010-01-P