[Federal Register Volume 70, Number 120 (Thursday, June 23, 2005)]
[Notices]
[Pages 36428-36430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3265]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51859: File No. SR-NASD-2005-068]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change Regarding a New 
Order Type for the Pre-Market Trading Session

June 16, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 36429]]

``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 25, 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, II, 
and III below, which Items have been prepared by Nasdaq. 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.
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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 establish a new order 
type called the Total Good-till-Canceled Order, which would be eligible 
for execution during the pre-market trading session.\3\ The text of the 
proposed rule change is set forth below. Proposed new language is in 
italics.\4\
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    \3\ Nasdaq neglected to complete this sentence. The staff of the 
Division of Market Regulation of the Commission therefore completed 
the sentence to include a summary description of the proposed rule 
change.
    \4\ The proposed rule change is marked to show changes from the 
rule text appearing in the NASD Manual available at http://www.nasd.com.
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* * * * *

4701. Definitions

    (a)-(ss) No Change.
    (tt) The term ``Total Good-till-Cancelled'' or ``GTX Order'' shall 
mean,
    (a) for orders in ITS Securities so designated, that if after entry 
into the Nasdaq Market Center, the order is not fully executed, the 
order (or unexecuted portion thereof) shall remain available for 
potential display between 7:30 a.m. and 6:30 p.m. and for potential 
execution between market open (9:30 a.m.) and 6:30 p.m., until 
cancelled by the entering party, or until 1 year after entry, whichever 
comes first.
    (b) for orders in Nasdaq-listed securities so designated, that if 
after entry into the Nasdaq Market Center, the order is not fully 
executed, the order (or unexecuted portion thereof) shall remain 
available for potential display between 7:30 a.m. and 4 p.m. and for 
execution between 8 a.m. and 4 p.m., until cancelled by the entering 
party, or until 1 year after entry, whichever comes first.
    (uu) No Change.
* * * * *

4704. Opening Process For Nasdaq-Listed Securities

    (a) No Change.
    (b) Trading Prior To Normal Market Hours. The system shall process 
all eligible Quotes/Orders in Nasdaq-listed securities at 8 a.m. in the 
following manner to prevent the creation of locked/crossed markets.
    (1) At 8 a.m., the system shall open in time priority all eligible 
Quotes as stated in paragraph (5) below and all eligible Orders in 
accordance with Rule 4701(ss), (tt) and (uu). Quotes/Orders whose limit 
price would not lock or cross the book shall be added to the book in 
strict time priority. Quotes/Orders whose limit price would lock or 
cross the book shall be placed in an ``In Queue'' state except as 
provided in paragraph (4).
    (2) No Change.
    (3) Once the process set forth in subparagraphs (1)-(2) is 
complete, the system shall begin processing Quotes and X, GTX and IOX 
Orders in accordance with their entry parameters.
    (4)-(7) No Change.
    (c)-(d) 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
    On April 18, 2005, Nasdaq launched a voluntary pre-market trading 
session of the execution service of the Nasdaq Market Center that 
begins at 8 a.m. rather than at 9:25 a.m. Currently, Nasdaq has two 
extended hours order types that are eligible for execution during the 
pre-market trading session: the Total Day Order (``X Order'') described 
in NASD Rule 4701(ss) and the Total Immediate or Cancel Order (``IOX 
Order'') described in NASD Rule 4701(uu). The X Order interacts with 
Nasdaq systems exactly as does the Day Order, except that it is 
eligible for display and execution during extended hours trading 
(trading that occurs outside normal market hours of 9:30 a.m. EST and 4 
p.m. EST). Likewise, the IOX Order interacts with Nasdaq systems 
exactly as does the Immediate or Cancel Order (``IOC Order'') except 
that it too is eligible for execution during extended hours trading.
    Nasdaq is proposing to introduce for Nasdaq-listed securities the 
``Total Good-till-Cancelled'' or ``GTX'' order type that is currently 
available for exchange-listed securities only. The GTX Order for 
Nasdaq-listed securities would be processed precisely as the Good-till-
Cancelled order, except that it would be available for display during 
the pre-market trading session in addition to the regular trading 
session. Specifically, Nasdaq proposes to amend NASD Rule 4701(tt) to 
make GTX Orders available for entry and display at 7:30 a.m., at which 
time they would receive a time stamp for purposes of determining time 
priority. In addition, Nasdaq is proposing to amend NASD Rule 
4704(b)(1) to make GTX Orders eligible for execution between 8 a.m. and 
4 p.m just as X and IOX orders are today.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\5\ in general, and with 
Section 15A(b)(6) of the Act,\6\ 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 believes that its 
current proposal is consistent with the NASD's obligations under these 
provisions of the Act because it would result in more orderly trading 
of Nasdaq stocks. It would also promote price discovery, order 
interaction and transparency during the pre-market trading session by 
encouraging the submission of additional orders into the Nasdaq market 
center.
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    \5\ 15 U.S.C. 78o-3.
    \6\ 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.

[[Page 36430]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2005-068 on the subject line.

Paper comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9309. All submissions should refer to File Number 
SR-NASD-2005-068. 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 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-2005-068 and should be 
submitted on or before July 14, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-3265 Filed 6-22-05; 8:45 am]
BILLING CODE 8010-01-P