02-21520. Joint Industry Plan; Order Granting Partial Temporary Approval of Amendment No. 13 of the Reporting Plan for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privilege Basis, Submitted by the National Association of ...

August 19, 2002.

I. Introduction and Description

On May 31, 2002, the Cincinnati Stock Exchange, Inc. (“CSE”) 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 Pacific Exchange, Inc. (“PCX”), and the Philadelphia Stock Exchange, Inc. (“PHLX”) (hereinafter referred to collectively as “Participants”),^[1] as members of the operating committee (“Operating Committee” or “Committee”) ^[2] of the Plan submitted to the Securities and Exchange Commission (“SEC” or “Commission”) a proposal to amend the Plan, pursuant to Rule 11Aa3-1 ^[3] and Rule 11Aa3-2 ^[4] under the Securities Exchange Act of 1934 (“Act” or “Exchange Act”). The proposal represents the 13th amendment (“13th Amendment”) made to the Plan. Notice of the proposed 13th Amendment was published in the Federal Register on July 5, 2002.^[5]

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 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 Nasdaq securities.

As discussed in the 13th Amendment Notice, proposed amendments to the Plan have been segregated into four categories: (1) Category 1, “Effective Upon Nasdaq's Exchange Registration;” (2) Category 2, “Effective Upon Launch of the Internal SIP;” (3) Category 3, “Effective Upon End of Parallel Period—Elimination of the Legacy SIP;” and (4) Category 4, “Timing Not An Issue.” Through the 13th Amendment Notice, the Commission granted temporary summary effectiveness to amendments detailed in Category 2 so as to allow the target launch date for the new Internal Securities Information Processor (“SIP”) data feeds to be met.^[6] The Commission received no comments on the proposed 13th Amendment.

This partial temporary approval order approves the 13th Amendment's extension of the Plan through August 19, 2003. This order does not approve the amendments detailed in Categories 1, 2, 3, and 4 in the 13th Amendment Notice,^[7] which will be addressed in a separate action.

II. Discussion

The Commission finds that extending the Plan for one year is consistent with the requirements of the Act and the rules and regulations thereunder, and, in particular, section 12(f) ^[8] and section 11A(a)(1) ^[9] of the Act and Rules 11Aa3-1 and 11Aa3-2 thereunder.^[10] 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.” ^[11] When the Commission first approved of 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.” ^[12] 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 pilot period of the Plan furthers the goals described above by preventing the lapsing of the sole effective transaction reporting plan for Nasdaq securities traded by other 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.

III. Conclusion

It is therefore ordered, pursuant to sections 12(f) and 11A of the Act ^[13] and paragraph (c)(2) of Rule 11Aa3-2 ^[14] thereunder, that the pilot expiration date for the Plan be, and hereby is, extended through August 19, 2003.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  The CSE was elected chair of the Operating 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.  Among other things, the 13th Amendment proposes to add the Nasdaq Stock Market, Inc. (“Nasdaq”) as a Participant. The Committee is made up of all the Participants.

3.  17 CFR 240.11Aa3-1.

4.  17 CFR 240.11Aa3-2.

5.  Securities Exchange Act Release No. 46139 (June 28, 2001 [sic]), 67 FR 44888 (“13th Amendment Notice”).

6.  In November of 2001, Nasdaq began implementing the “Internal SIP” project. The Internal SIP is a separate technology infrastructure within Nasdaq that will perform the functions of the SIP for Nasdaq-listed securities. When the Internal SIP is in place, Nasdaq will be able to separate its functions as a stock market from its functions as a SIP for the Plan.

7.  Pursuant to Rule 11Aa3-2(c)(4), 17 CFR 240.11Aa3-2(c)(4), the temporary summary effectiveness granted to the Category 2 amendments by the 13th Amendment Notice may not exceed 120 days in length. This partial temporary approval order has no impact upon such temporary summary effectiveness of the Category 2 amendments.

8.  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.

9.  15 U.S.C. 78k-1(a)(1).

10.  17 CFR 240.11Aa3-1 and 17 CFR 240.11Aa3-2.

11.  15 U.S.C. 78k-1(a).

12.  Securities Exchange Act Release No. 28146 (June 26, 1990), 55 FR 27917 (July 6, 1990).

13.  15 U.S.C. 78l(f) and 15 U.S.C. 78k-1.

14.  17 CFR 240.11Aa3-2(c)(2).