00-21744. Joint Industry Plan; Solicitation of Comments and Order Approving Amendment No. 11 to Reporting Plan for Nasdaq/National Market Securities Traded on an Exchange on an Unlisted or Listed Basis, Submitted by the National Association of ...

August 16, 2000.

I. Introduction

On July 5, 2000, the National Association of Securities Dealers, Inc. (“NASD”), on behalf of itself and the Boston Stock Exchange, Inc. (“BSE”) the Chicago Stock Exchange, Inc. (“CHX”), the Philadelphia Stock Exchange, Inc. (“PHLX”), the Pacific Exchange (“PCX”) and the Cincinnati Stock Exchange (“Cincinnati”) submitted to the Securities and Exchange Commission (“Commission” or “SEC”) Amendment No. 11 to a joint transaction reporting plan (“Plan”) ^[1] for Nasdaq/National Market (“Nasdaq/NM”) (previously referred to as Nasdaq/NMS) securities traded on an exchange on an unlisted or listed basis.^[2] This notice and order approves the amendment, which would add PCX as a Participant to the Plan and make a change to the section of the Plan entitled “Symbols for Market Identification for Quotation Information and Transaction Reports” to indicate that PCX should be referred to as “Pacific Stock Exchange.”

II. Background

The Commission originally approved the Plan on June 26, 1990.^[3] The Plan governs the collection, consolidation and dissemination of quotation and transaction information for Nasdaq/NM securities listed on an exchange or traded on an exchange pursuant to a grant of UTP.^[4] The Commission originally approved trading pursuant to the Plan on a one-year pilot basis, with the pilot period to commence when transaction reporting pursuant to the Plan commenced. Accordingly, the pilot period commenced on July 12, 1993.^[5] The Plan has since been in operation on an extended pilot basis.^[6]

III. Description of the Plan

The Plan provides for the collection from Plan Participants and the consolidation and dissemination of vendors, subscribers and others of quotation and transaction information in “eligible securities.” ^[7] The Plan contains various provisions concerning its operation, including: Implementation of the Plan; Manner of Collecting, Processing, Sequencing, Making Available and Disseminating Last Sale Information; Reporting Requirements (including hours of operation); Standards and Methods of Ensuring Promptness, Accuracy and Completeness of Transaction Reports; Terms and Conditions of Access; Description of Operation of Facility Contemplating by the Plan; Method and Frequency of Processor Evaluation; Written Understandings of Agreements Relating to Interpretation of, or Participation in, the Plan; Calculation of the Best Bid and Offer; Dispute Resolution, and Method of Determination and Imposition, and Amount of Fees and Charges.^[8]

IV. Discussion

The Commission finds that it is consistent with Section 11A ^[9] of the Act to add PCX as a Participant to the Plan and to change the section of the Plan entitled “Symbols for Market Identification for Quotation Information and Transaction Reports” to indicate that PCX should be referred to as “Pacific Exchange” instead of “Pacific Stock Exchange.” Section 11A 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 cities as an objective of that system the “fair competition * * * between exchange markets and markets other than exchange markets.” ^[10] 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.” ^[11] The Commission now finds that adding a Participant to the Plan furthers these same goals.

Section 1C of the Plan provides that a national securities exchange in whose market eligible securities become traded, may become a Participant, provided that the exchange executes a copy of the Plan and pays its share of development costs as specified in Section XIV of the Plan. PCX has filed an executed copy of the Plan with the Commission, and the Participants have represented to the Commission that PCX has paid its share of the development costs specified in Section XIV of the Plan. Accordingly, the Commission finds that the PCX has satisfied the requirements listed in the Plan to become a Participant.

The Commission also finds that the technical amendment to the Plan is consistent with the Act. The Commission believes that the Plan should accurately reflect the Participants. Thus, it is appropriate that all references to the Pacific Stock Exchange are changed to the Pacific Exchange.

V. Solicitation of Comment

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed amendment is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed amendment that are filed with the Commission, and all written communications relating to the proposed amendment 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 at the Commission's Public Reference Room. All submissions should refer to File No. S7-24-89 and should be submitted by September 15, 2000.

VI. Conclusion

It Is Therefore Ordered, pursuant to Sections 12(f) and 11A of the Act and paragraph (c)(2) of Rule 11Aa3-2 thereunder, that Amendment No. 11 to the Plan, is approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[12]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  Section 12(f) of the Securities Exchange Act of 1934 (“Act”) describes the circumstances under which an exchange may trade a security that is not listed on the exchange, i.e., by extending unlisted trading privileges (“UTP”) to the security. See 15 U.S.C. 78 l (f). Section 12(f) required exchanges to apply to the Commission before extending UPT to any security. In order to approve an exchange UTP application for a registered security not listed on any exchange (“OTC/UTP”), Section 12(f) required the Commission to determine that various criteria had been met concerning fair and orderly markets, the protection of investors, and certain national market initiatives. Section 12(f) was amended on October 22, 1994, the amendment removed the application requirement. OTC/UTP is now allowed only purusant to a Commission order or rule, which is to be issued or promulgated under essentially the same standards that previously applied to Commission review of UTP applications. The present order fulfills these Section 12(f) requirements.

2.  The signatories to the Plan, i.e., the NASD, the CHX (previously, the Midwest Stock Exchange, Inc.), the PHLX, and the BSE, are the “Participants.” The BSE, however, joined the Plan as a “Limited Participant,” and reports quotation information and transaction reports only in Nasdaq/NM securities listed on the BSE. Originally, the American Stock Exchange, Inc., was a Participant to the Plan, but did not trade securities pursuant to the Plan, and withdrew from participation in the Plan in August 1994.

3.  See Securities Exchange Act Release No. 28146 (June 26, 1990), 55 FR 27917 (July 6, 1990) (“1990 Approval Order”).

4.  See Section 12(f)(2) of the Act. See also December 1998 Extension Order, infra note 6, for a more in depth description of the Plan.

5.  See letter from David T. Rusoff, Foley & Lardner, to Betsy Prout, Division of Market Regulation SEC, dated May 9, 1994.

6.  See Securities Exchange Act Release No. 34371 (July 13, 1994), 59 FR 37103 (July 20, 1994); Securities Exchange Act Release No. 35221 (January 11, 1995), 60 FR 3886 (January 19, 1995); Securities Exchange Act Release No. 36102 (August 14, 1995), 60 FR 43626 (August 22, 1995); Securities Exchange Act Release No. 36226 (September 13, 1995), 60 FR 40929 (September 21, 1995); Securities Exchange Act Release No. 36368 (October 13, 1995), 60 FR 54091 (October 19, 1995); Securities Exchange Act Release No. 36481 (November 13, 1995), 60 FR 58119 (November 24, 1995); Securities Exchange Act Release No. 36589 (December 13, 1995), 60 FR 65696 (December 20 1995); Securities Exchange Act Release No. 36650 (December 28, 1995), 61 FR 358 (January 4, 1996); Securities Exchange Act Release No. 36934 (March 6, 1996), 61 FR 10408 (March 13, 1996); Securities Exchange Act Release No. 36985 (March 18, 1996), 61 FR 12122 (March 25, 1996); Securities Exchange Act Release 37689 (September 16, 1996), 61 FR 50058 (September 24, 1996); Securities Exchange Act Release No. 37772 (October 1, 1996), 61 FR 52980 (October 9, 1996); Securities Exchange Act Release No. 38457 (March 31, 1997) 62 FR 16880 (April 8, 1997; Securities Exchange Act Release No. 38794 (June 30, 1997) 62 FR 36586 (July 8, 1997); Securities Exchange Act Release No. 39505 (December 31, 1997) 63 FR 1515 (January 9, 1998); Securities Exchange Act Release No. 40151 (July 1, 1998) 63 FR 36979 (July 8, 1998); Securities Exchange Act Release No. 40869 (December 31, 1998), 64 FR 1834 (January 12, 1999) (“December 1998 Extension Order”); Securities Exchange Act Release No. 41392 (May 12, 1999), 64 FR 27839 (May 21, 1999) (“May 1999 Approval Order”); Securities Exchange Act Release No. 42268 (December 23, 1999) 65 FR 1202 (January 7, 2000); and Securities Exchange Act Release No. 43005 (June 30, 2000) 65 FR 42411 (July 10, 2000).

7.  The Plan defines “eligible security” as any Nasdaq/NM security as to which unlisted trading privileges have been granted to a national securities exchange pursuant to Section 12(f) of the Act or that is listed on a national securities exchange. On May 12, 1999, the Commission expanded the number of eligible Nasdaq/NM securities that may be traded by the CHX pursuant to the Plan from 500 to 1000. See May 1999 Approval Order, supra note 6.

8.  The full text of the Plan, as well as a “Concept Paper” describing the requirements of the Plan, are contained in the original filing which is available for inspection and copying in the Commission's public reference room.

9.  15 U.S.C. 78k-1. In approving this amendment, the Commission has considered the amendment's impact on efficiency, competition, and capital formations. 15 U.S.C. 78(c)(f).

10.  15 U.S.C. 78k-1(a)(1)(C)(ii).

11.  See supra note 3.

12.  17 CFR 200.30-3(a)(29).