[Federal Register Volume 67, Number 148 (Thursday, August 1, 2002)]
[Notices]
[Pages 49972-49973]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 02-19456]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46260; File No. SR-NASD-2002-67]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment Nos. 1 and 2 
Thereto by the National Association of Securities Dealers, Inc. 
Relating to the Elimination of References to the Term ``Agency Quote'' 
From the Rules of the Nasdaq National Market Execution System and the 
Nasdaq Order Display Facility

July 25, 2002.
    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 May 28, 2002, the National Association of Securities Dealers, Inc. 
(''NASD''), through its subsidiary, the Nasdaq Stock Market, Inc. 
(``Nasdaq''), submitted to 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. On July 12, 
2002, Nasdaq filed Amendment No. 1 to the proposal.\3\ On July 24, 
2002, Nasdaq filed Amendment No. 2 to the proposal.\4\ The Commission 
is publishing this notice to solicit comments on the proposed rule 
change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Thomas P. Moran, Associate General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated July 11, 2002 
(``Amendment No. 1''). In Amendment No. 1, Nasdaq made corrections 
to its proposed rule text which replaced the rule text in the 
original filing entirely and added a footnote in its discussion to 
clarify that this filing would remove language from Nasdaq rules 
referring to the ``agency quote'' concept that contemplated allowing 
market participants to represent agency trading interest via a 
quotation separate from that used for their proprietary trading. The 
rules retain, where appropriate, references to the term ``agency'' 
when used as a description of the capacity in which a market 
participant is acting on behalf of a customer order.
    \4\ See letter from Thomas P. Moran, Associate General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division, 
Commission, dated July 24, 2002 (``Amendment No. 2''). In Amendment 
No. 2, Nasdaq made corrections to its proposed rule text in NASD 
Rule 4701 and 4710. For purposes of calculating the 60-day 
abrogation period and the 30-day operative date, the Commission 
considers the period to have commenced on July 24, 2002, the date 
Nasdaq filed Amendment No. 2.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Nasdaq proposes to eliminate all references to the term ``agency 
quote'' that are contained in the Nasdaq National Market Execution 
System and Nasdaq Order Display Facility (collectively 
``SuperMontage''). The text of the proposed rule change, as amended, is 
available at the Office of the Secretary, Nasdaq, and at the 
Commission.

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 eliminate all references to the term 
``agency quote'' that are contained in the SuperMontage. On February 3, 
1999, Nasdaq filed SR-NASD-99-09, in which Nasdaq proposed to implement 
a system to allow market makers to display customer limit orders under 
a separate market participant identifier.\5\ Colloquially known as the 
Agency Quote proposal, the Commission published the proposal for 
comment on March 2, 1999.
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    \5\ See Securities Exchange Act Release No. 41128 (March 2, 
1999), 64 FR 12198 (March 11, 1999).
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    Separately, on October 1, 1999, Nasdaq filed to amend the Nasdaq 
National Market Execution System rules

[[Page 49973]]

to establish the SuperMontage.\6\ The proposed SuperMontage rules 
contained reference to the concept of Agency Quote, as rule filing SR-
NASD-99-09 was pending before the Commission at the time Nasdaq filed 
the SuperMontage proposal. Among other things, the SuperMontage 
proposed to establish a mechanism for market participants to display 
customer limit orders under a separate Nasdaq market maker ID 
(``MMID''). On January 19, 2001, the Commission approved the 
SuperMontage proposal, and the related rules that contained references 
to the still-pending Agency Quote proposal.\7\ On December 31, 2001, 
Nasdaq withdrew the Agency Quote proposal as the SuperMontage provided 
equivalent functionality as an Agency Quote.\8\ The purpose of this 
rule filing is to eliminate all references to the concept of ``Agency 
Quote'' in the approved SuperMontage rules.
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    \6\ See Securities Exchange Act Release No. 42166 (November 22, 
1999), 64 FR 68125 (December 6, 1999).
    \7\ See Securities Exchange Act Release No. 43863 (January 19, 
2001), 66 FR 8020 (January 26, 2001).
    \8\ Nasdaq allows for market makers to submit multiple quotes/
orders and, therefore, a separate agency quote is unnecessary. 
Telephone conversation between Thomas P. Moran, Associate General 
Counsel, Nasdaq, and Cyndi Nguyen, Attorney, Division, Commission, 
on July 19, 2002
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2. Statutory Basis
    Nasdaq believes the proposed rule change, as amended, is consistent 
with the provisions of Section 15A of the Act \9\ in general, and with 
Section 15A(b)(6) of the Act \10\ in particular, in that the proposal 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
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    \9\ 15 U.S.C. 78o-3.
    \10\ 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, as amended, 
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 any written comments with 
respect to the proposed rule change, as amended.

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

    The foregoing proposed rule change, as amended, (1) does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms, does not become operative until 30 days from the 
date on which it was filed, or such shorter time as the Commission may 
designate. The proposed rule change, as amended, has therefore become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\ At any time within 60 days of the filing of 
this proposed rule change, as amended, 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.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). Nasdaq has requested and the 
Commission has waived the usual five-day pre-filing notice 
requirement.
    \13\ 17 CFR 240.19b-4(f)(6).
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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 proposal, as 
amended, is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
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 will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to file number SR-NASD-2002-67 and 
should be submitted by August 22, 2002. 
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
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pursuant to delegated authority.\14\

Margaret H. McFarland,
 Deputy Secretary.
[FR Doc. 02-19456 Filed 7-31-02; 8:45 am]
BILLING CODE 8010-01-P