

[Federal Register: December 14, 2005 (Volume 70, Number 239)]
[Notices]               
[Page 74059-74061]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de05-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52886; 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 National Stock Exchange, Inc., and 
The Philadelphia Stock Exchange, Inc. and To Extend Certain Exemptive 
Relief

December 5, 2005.

I. Introduction and Description

    On December 2, 2005, 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 National Stock Exchange, Inc. (``NSX''), and the 
Philadelphia Stock Exchange, Inc. (``Phlx'') (hereinafter referred to 
collectively as ``Participants''),\1\ 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.\2\ 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

[[Page 74060]]

Nasdaq securities. Currently, the Plan is scheduled to expire on 
December 21, 2005.
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    \1\ PCX is the chair 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.
    \2\ See letter from Bridget M. Farrell, Chairman, OTC/UTP 
Operating Committee, to Jonathan G. Katz, Secretary, Commission, 
dated December 2, 2005.
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    This order grants summary effectiveness, pursuant to Rule 608(b)(4) 
under the Securities Exchange Act of 1934 (``Act''),\3\ 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 608(b)(4) under the Act,\4\ the Date 
Extension will be effective upon publication in the Federal Register on 
temporary basis not to exceed 120 days.
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    \3\ 17 CFR 242.608(b)(4).
    \4\ 17 CFR 242.608(b)(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.\5\ Pursuant to the 13th Amendment of the Plan and Rule 
608(a)(3),\6\ 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 608(c).\7\ As discussed at length in the notice of the 
13th Amendment,\8\ the Commission had determined to relieve the 
potential conflict among the SuperMontage approval order,\9\ Rule 
608,\10\ and the Plan, by granting the NASD an exemption under Rule 
608(e) \11\ from compliance with Section VI.C.1. of the Plan as 
required by Rule 608(c) \12\ until such time as Nasdaq is registered as 
a national securities exchange.\13\ The Plan Participants have 
requested an extension of the exemptive relief.
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    \5\ 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....''
    \6\ 17 CFR 242.608(a)(3).
    \7\ 17 CFR 242.608(c). Commission Rule 608(c) requires a self-
regulatory organization participant of national market system plan 
to comply with the terms of that plan.
    \8\ See Securities Exchange Act Release No. 46139 (June 28, 
2001), 67 FR 44888 (July 5, 2002) (``13th Amendment Notice'').
    \9\ See Securities Exchange Act Release No. 43863 (January 19, 
2001), 66 FR 8020 (January 26, 2001).
    \10\ 17 CFR 242.608.
    \11\ 17 CFR 242.608(e).
    \12\ 17 CFR 242.608(c).
    \13\ On March 15, 2001, the Nasdaq Stock Market, Inc. 
(``Nasdaq'') submitted to the Commission a Form 1 application 
pursuant to Section 6 of the Act, seeking registration as a national 
securities exchange. The most recent Form 1 and accompanying 
amendments were published for comment. See Securities Exchange Act 
Release No. 52559 (October 4, 2005), 70 FR 59097 (October 11, 2005).
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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 601 and 608 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. The Commission finds that extending the operation of the Plan 
through summary effectiveness furthers the goals described above by 
preventing the lapse 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 608(e) \19\ from compliance with 
Section VI.C.1. of the Plan as required by Rule 608(c).\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 601 and 608 thereunder.\22\
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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 242.601 and 17 CFR 242.608.
    \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).
    \19\ 17 CFR 242.608(e).
    \20\ 17 CFR 242.608(c).
    \21\ 15 U.S.C. 781(f) and 15 U.S.C. 78k-1.
    \22\ 17 CFR 242.601 and 17 CFR 242.608.
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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 rule-comments@sec.gov. 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, Station Place, 100 F 
Street, NE, Washington, DC 20549-9303.
    All submissions should refer to File Number 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 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

[[Page 74061]]

Room. Copies of the filing also will be available for inspection and 
copying at the Office of the Secretary of the Committee, currently 
located at the Pacific Exchange, Inc. and Archipelago Exchange L.L.C., 
100 South Wacker Drive, Suite 2000, Chicago, IL 60606. 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 S7-24-89 and should be 
submitted on or before January 4, 2006.

V. Conclusion

    It is therefore ordered, pursuant to Sections 12(f) and 11A of the 
Act \23\ and paragraph (b)(4) of Rule 608 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. 78(f) and 15 U.S.C. 78k-1.
    \24\ 17 CFR 242.608(b)(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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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-7329 Filed 12-13-05; 8:45 am]

BILLING CODE 8010-01-P
