02-10157. Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Granting Approval to a Proposed Rule Change and Amendment No. 1 Thereto Relating to the Elimination of Interval Delays in Nasdaq's SuperMontage System

April 18, 2002.

On January 2, 2002, the National Association of Securities Dealers, Inc. (“NASD” or “Association”), through its subsidiary, the Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),^[1] and Rule 19b-4 thereunder,^[2] a proposed rule change to amend NASD Rule 4710(b)(1)(D) to remove delays between executions across price levels in Nasdaq's future Order Display and Collector Facility (“NNMS” or “SuperMontage”). On March 7, 2002, Nasdaq filed Amendment No. 1 to the proposed rule change.^[3] ] The proposed rule change and Amendment No. 1 were published for comment in the Federal Register on March 19, 2002.^[4] The Commission received no comments regarding the proposal, as amended.

The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association ^[5] and, in particular, the requirements of section 15A of the Act ^[6] and the rules and regulations thereunder. Specifically, the Commission finds that the proposal to eliminate the delays between executions at different price levels in SuperMontage is consistent with section 15A(b)(6) of the Act ^[7] because it may minimize the risk of orders queuing within SuperMontage, thereby helping to ensure the efficient and orderly operation of SuperMontage. In addition, the Commission believes that the prompt execution of orders in SuperMontage should facilitate the price discovery process, to the benefit of all market participants. Nasdaq represents that it will implement this rule change within 30 days after successful completion of SuperMontage user acceptance testing. The Commission expects Nasdaq to carefully monitor the effect on the Nasdaq market and on market participants of eliminating the interval delays between executions in SuperMontage, as it currently does for SuperSOES.^[8]

For the foregoing reasons, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and rules and regulations thereunder.

It is therefore ordered, pursuant to section 19(b)(2) of the Act,^[9] that the proposed rule change (SR-NASD-2001-97), as amended, is approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[10]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

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, Commission, dated March 6, 2002 (“Amendment No. 1”).

4.  See Securities Exchange Act Release No. 45554 (March 13, 2002), 67 FR 12631.

5.  In approving this amended proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

6.  15 U.S.C. 78 o-3.

7.  15 U.S.C. 78 o-3(b)(6).

8.  See Securities Exchange Act Release No. 44504 (July 2, 2001), 66 FR 36022 (July 10, 2001) (order approving the elimination of interval delays in SuperSOES); see also Securities Exchange Act Release No. 43863 (January 19, 2001), 66 FR 8020 (January 26, 2001) (order approving SuperMontage and requiring Nasdaq to monitor market performance in SuperMontage as it related to interval delays).

9.  15 U.S.C. 78s(b)(2).

10.  17 CFR 200.30-3(a)(12).