Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Regarding Modifications to the Nasdaq Opening Process For Nasdaq-Listed Stocks, 9404-9406 [E5-771]

Download as PDF 9404 Federal Register / Vol. 70, No. 37 / Friday, February 25, 2005 / Notices (regardless of whether or not such member is an affiliate) for execution, the Manning Interpretation would apply. In addition, NASD is proposing to delete certain unnecessary rule text contained in footnote one relating to a Nasdaq pilot program expanding the operation of certain Nasdaq transaction and quotation reporting systems and facilities during the period from 4 p.m. to 6:30 p.m. eastern time. This Nasdaq pilot program became a permanent program in 2003 and this footnote text inadvertently was not deleted as part of the rule filing making the pilot permanent.8 Finally, NASD no longer refers to itself or its subsidiary, NASD Regulation, Inc., using its full corporate name, ‘‘the Association,’’ ‘‘the NASD’’ or ‘‘NASD Regulation, Inc.’’ Instead, NASD uses ‘‘NASD’’ unless otherwise appropriate for corporate or regulatory reasons. Accordingly, the proposed rule change replaces several references to ‘‘Association’’ in the text of the proposed rule change with ‘‘NASD.’’ 2. Statutory Basis NASD believes that the proposed rule change, as amended, is consistent with the provisions of section 15A(b)(6) of the Act,9 which requires, among other things, that NASD’s rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. NASD believes that the proposed rule change, as amended, will improve treatment of customer limit orders and enhance the integrity of the market. B. Self-Regulatory Organization’s Statement on Burden on Competition NASD does not believe that the proposed rule change 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 Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 8 See Securities Exchange Act No. 47308 (February 4, 2003), 68 FR 6976 (February 11, 2003) (File No. SR–NASD–2003–14). 9 15 U.S.C. 78o–3(b)(6) VerDate jul<14>2003 19:31 Feb 24, 2005 Jkt 205001 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NASD–2004–089 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609. All submissions should refer to File Number SR–NASD–2004–089. 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 (https://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 Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of NASD. 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 PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 available publicly. All submissions should refer to File Number SR–NASD– 2004–089 and should be submitted on or before March 18, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.10 Margaret H. McFarland, Deputy Secretary. [FR Doc. 05–3678 Filed 2–24–05; 8:45 am] BILLING CODE 8010–01–M SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51233; File No. SR–NASD– 2005–017] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Regarding Modifications to the Nasdaq Opening Process For NasdaqListed Stocks February 18, 2005. 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 January 25, 2005, the National Association of Securities Dealers, Inc. (‘‘NASD’’), through its subsidiary, The Nasdaq Stock Market, Inc. (‘‘Nasdaq’’), filed with 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 February 15, 2005, Nasdaq amended the proposed rule change (‘‘Amendment No. 1’’).3 Nasdaq has designated the proposed rule change as ‘‘noncontroversial’’ under Section 19(b)(3)(A) of the Act 4 and Rule 19b–4(f)(6) thereunder,5 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Nasdaq is filing the proposed rule change, as amended, to extend a current pilot program until April 30, 2005, during which time Nasdaq will continue 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 In Amendment No. 1, Nasdaq restated the proposed rule change in its entirety. 4 15 U.S.C. 78s(b)(3)(A). 5 17 CFR 240.19b–4(f)(6). 1 15 E:\FR\FM\25FEN1.SGM 25FEN1 Federal Register / Vol. 70, No. 37 / Friday, February 25, 2005 / Notices to reject the entry of Total Day Orders prior to 9:25 a.m. The pilot rule language under NASD Rule 4701(ss)(2) was established on November 3, 2004, and is effective through February 2, 2005.6 This proposal would extend the pilot language under Rule 4701(ss)(2) without change through April 30, 2005. Therefore, there is no proposed rule language contained in this proposal. 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, as amended, 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 extend through April 30, 2005, a pilot designed to address a harmful unintended consequence of the Modified Nasdaq Opening. Specifically, upon implementing the improved preopening trading environment set forth in Rule 4704(b), Nasdaq identified a harmful unintended consequence of the Modified Opening Process (‘‘MOP’’) by which Nasdaq establishes its opening order book and unlocks and uncrosses the market. As described in SR–NASD– 2004–071, firms have three options for determining the price at which their carryover quotes are opened at 9:25: (1) The last quotation price entered during the previous day; (2) the last quotation price the firm enters after 7:30 and before 9:25 a.m.; or (3) the quote limits for Nasdaq, currently $.01 (bid) and $2,000 (ask).7 Many Nasdaq participants have programmed their quotation management systems to select the first option, carrying over the final quotation entered during the previous trading day. At the same time, a small number of firms have entered X Orders into Nasdaq’s system that cross the market 6 See Securities Exchange Act Release No. 50640 (November 5, 2004), 69 FR 65664 (November 15, 2004) (SR–NASD–2004–172) (‘‘Release No. 34– 50640’’). 7 See Securities Exchange Act Release No. 50405 (September 16, 2004), 69 FR 57118 (September 23, 2004) (SR–NASD–2004–071). VerDate jul<14>2003 19:31 Feb 24, 2005 Jkt 205001 by a significant amount, in some cases by as much as 20 dollars. When Nasdaq applies the MOP, which automatically executes orders that would cross the market, the system executes those X Orders that are significantly away from the market against the stale carryover quotations of other members resulting in inferior executions. To address this situation quickly, Nasdaq changed the pre-opening trading environment for a pilot period ending February 2, 2005.8 Specifically, Nasdaq moved the beginning entry time for X Orders from 7:30 a.m. to 9:25 a.m. As a result, X Orders do not participate in the market opening process described in Rule 4704(b), which begins at 9:25 a.m., eliminating the risk of X Orders automatically executing against a stale quote during that process. Nasdaq believes that that change was necessary and sufficient to address quickly the harmful unintended consequence described above and to preserve a fair and orderly opening of trading in Nadsaq. It is important to note that participation in pre-opening trading is completely voluntary on firms’ part, that the actual opening of the market and concomitant market maker obligations would continue to begin at 9:30 a.m. as is the case today. Nasdaq proposes to extend the pilot through April 30, 2005, while the Commission considers Nasdaq’s proposed permanent solution to this issue. On January 25, 2005, Nasdaq filed a proposal to make three changes to the opening process: (1) Applying the Market Opening Process at 8 a.m. rather than 9:25 as currently approved; (2) extending the availability of Total Day and Total Immediate or Cancel Orders to 8 a.m. from 9:25, and adding the availability of Total Good-till-Canceled Orders during the same period; and (3) establishing a system default that protects market participants from unexpected executions upon the opening of Nasdaq’s execution functionality at 8 a.m.9 According to Nasdaq, these modifications would provide a more efficient long-term solution, but they would take longer to implement than simply rejecting X Orders until 9:25. Nasdaq believes it is imperative to address the situation quickly and to simultaneously pursue a long-term solution. 2. Statutory Basis Nasdaq believes that the proposed rule change, as amended, is consistent with the provisions of Section 15A of PO 00000 the Act,10 in general, and with Section 15A(b)(6) of the Act,11 in particular, in that Section 15A(b)(6) requires, among other things, that a national securities association’s rules be designed to protect investors and the public interest. Nasdaq believes that its current proposal is consistent with the NASD’s obligations under these provisions of the Act because it would result in a more orderly opening for all Nasdaq stocks. The proposed rule change, as amended, would create a fair, orderly, and unified opening for Nasdaq stocks, prevent the occurrence of locked and crossed markets in halted securities, and preserve price discovery and transparency that is vital to an effective opening of trading. B. Self-Regulatory Organization’s Statement on Burden on Competition Nasdaq does not believe that the proposed rule change, as amended, would 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 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 Because the foregoing proposed rule change, as amended, does not: (i) Significantly affect the protection of investors or the public interest; (ii) Impose any significant burden on competition; and (iii) Become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and Rule 19b–4(f)(6) thereunder.13 Nasdaq has requested that the Commission waive the five-day prefiling notice requirement and the 30-day operative delay for ‘‘non-controversial’’ proposals, based upon a representation that the proposal is of the utmost importance to the fair and orderly operation of The Nasdaq Stock Market during the pre-opening trading period. The Commission believes that waiver of 10 15 U.S.C. 78o–3. U.S.C. 78o–3(b)(6). 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b–4(f)(6). 11 15 8 See 9 See Release No. 34–50640, supra note 6. SR–NASD–2005–009. Frm 00139 Fmt 4703 Sfmt 4703 9405 E:\FR\FM\25FEN1.SGM 25FEN1 9406 Federal Register / Vol. 70, No. 37 / Friday, February 25, 2005 / Notices the five-day pre-filing requirement and the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow Nasdaq to continue the pilot without interruption. For this reason, the Commission designates the proposal to be effective and operative upon filing with the Commission.14 At any time within 60 days of the filing of the proposed rule change, 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. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NASD–2005–017 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609. All submissions should refer to File Number SR–NASD–2005–017. 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 (https://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 Room. Copies of such filing also will be available for inspection and copying at the principal office of the NASD. 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 SR–NASD–2005–017 and should be submitted on or before March 18, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.15 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–771 Filed 2–24–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51224; File No. SR–NASD– 2005–019] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the National Association of Securities Dealers, Inc. To Modify Pricing for NASD Members Using the Nasdaq Market Center and Nasdaq’s Brut Facility February 17, 2005. 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 February 1, 2004, the National Association of Securities Dealers, Inc. (‘‘NASD’’), through its subsidiary, The Nasdaq Stock Market, Inc. (‘‘Nasdaq’’), filed with 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. Nasdaq has designated this proposal in part as one establishing or changing a due, fee or other charge imposed by the selfregulatory organization under Section 19(b)(3)(A)(ii) 3 of the Act and Rule 19b– 4(f)(2) thereunder,4 and in part as one concerned with the administration of a self-regulatory organization under Section 19(b)(3)(A)(iii) 5 of the Act and 14 For purposes only of waiving the 30-day operative delay of the proposed rule change, the Commission considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). VerDate jul<14>2003 19:31 Feb 24, 2005 Jkt 205001 PO 00000 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 5 15 U.S.C. 78s(b)(3)(A)(iii). 1 15 Frm 00140 Fmt 4703 Sfmt 4703 Rule 19b–4(f)(3) thereunder,6 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to modify the pricing for NASD members using the Nasdaq Market Center and Nasdaq’s Brut Facility. Nasdaq states that it will implement the proposed rule change on February 1, 2005. The text of the proposed rule change is available on the NASD’s Web site (https:// www.nasd.com), at the NASD’s Office of the Secretary, and at the Commission’s Public Reference Room. 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 Consolidation of Fee Schedule for Nasdaq Market Center and Brut Facility. In November 2004, Nasdaq established a uniform fee schedule for transactions in Nasdaq-listed securities through the Nasdaq Market Center and Nasdaq’s Brut Facility.7 Nasdaq is now proposing a uniform fee schedule for transactions in exchange-listed securities. Nasdaq states that, as is currently true for the Nasdaq Market Center, there will be no charge or credit associated with orders to buy or sell exchange-listed securities other than exchange-traded funds listed on the American Stock Exchange (‘‘Amex-listed ETFs’’), although Nasdaq is introducing a fee of $0.004 per share executed for orders that are routed by Brut using an exchange’s proprietary 6 17 CFR 240.19b–4(f)(3). Securities Exchange Act Release No. 50670 (November 16, 2004), 69 FR 67979 (November 22, 2004) (SR–NASD–2004–167); Securities Exchange Act Release No. 50787 (December 2, 2004), 69 FR 71459 (December 9, 2004) (SR–NASD–2004–170). 7 See E:\FR\FM\25FEN1.SGM 25FEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 37 (Friday, February 25, 2005)]
[Notices]
[Pages 9404-9406]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-771]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51233; File No. SR-NASD-2005-017]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto Regarding Modifications to the 
Nasdaq Opening Process For Nasdaq-Listed Stocks

February 18, 2005.
    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 January 25, 2005, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), filed with 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 February 
15, 2005, Nasdaq amended the proposed rule change (``Amendment No. 
1'').\3\ Nasdaq has designated the proposed rule change as ``non-
controversial'' under Section 19(b)(3)(A) of the Act \4\ and Rule 19b-
4(f)(6) thereunder,\5\ which renders the proposed rule change effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, Nasdaq restated the proposed rule change 
in its entirety.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is filing the proposed rule change, as amended, to extend a 
current pilot program until April 30, 2005, during which time Nasdaq 
will continue

[[Page 9405]]

to reject the entry of Total Day Orders prior to 9:25 a.m. The pilot 
rule language under NASD Rule 4701(ss)(2) was established on November 
3, 2004, and is effective through February 2, 2005.\6\ This proposal 
would extend the pilot language under Rule 4701(ss)(2) without change 
through April 30, 2005. Therefore, there is no proposed rule language 
contained in this proposal.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 50640 (November 5, 
2004), 69 FR 65664 (November 15, 2004) (SR-NASD-2004-172) (``Release 
No. 34-50640'').
---------------------------------------------------------------------------

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, as 
amended, 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 extend through April 30, 2005, a pilot 
designed to address a harmful unintended consequence of the Modified 
Nasdaq Opening. Specifically, upon implementing the improved pre-
opening trading environment set forth in Rule 4704(b), Nasdaq 
identified a harmful unintended consequence of the Modified Opening 
Process (``MOP'') by which Nasdaq establishes its opening order book 
and unlocks and uncrosses the market. As described in SR-NASD-2004-071, 
firms have three options for determining the price at which their 
carryover quotes are opened at 9:25: (1) The last quotation price 
entered during the previous day; (2) the last quotation price the firm 
enters after 7:30 and before 9:25 a.m.; or (3) the quote limits for 
Nasdaq, currently $.01 (bid) and $2,000 (ask).\7\ Many Nasdaq 
participants have programmed their quotation management systems to 
select the first option, carrying over the final quotation entered 
during the previous trading day. At the same time, a small number of 
firms have entered X Orders into Nasdaq's system that cross the market 
by a significant amount, in some cases by as much as 20 dollars. When 
Nasdaq applies the MOP, which automatically executes orders that would 
cross the market, the system executes those X Orders that are 
significantly away from the market against the stale carryover 
quotations of other members resulting in inferior executions.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 50405 (September 16, 
2004), 69 FR 57118 (September 23, 2004) (SR-NASD-2004-071).
---------------------------------------------------------------------------

    To address this situation quickly, Nasdaq changed the pre-opening 
trading environment for a pilot period ending February 2, 2005.\8\ 
Specifically, Nasdaq moved the beginning entry time for X Orders from 
7:30 a.m. to 9:25 a.m. As a result, X Orders do not participate in the 
market opening process described in Rule 4704(b), which begins at 9:25 
a.m., eliminating the risk of X Orders automatically executing against 
a stale quote during that process. Nasdaq believes that that change was 
necessary and sufficient to address quickly the harmful unintended 
consequence described above and to preserve a fair and orderly opening 
of trading in Nadsaq. It is important to note that participation in 
pre-opening trading is completely voluntary on firms' part, that the 
actual opening of the market and concomitant market maker obligations 
would continue to begin at 9:30 a.m. as is the case today.
---------------------------------------------------------------------------

    \8\ See Release No. 34-50640, supra note 6.
---------------------------------------------------------------------------

    Nasdaq proposes to extend the pilot through April 30, 2005, while 
the Commission considers Nasdaq's proposed permanent solution to this 
issue. On January 25, 2005, Nasdaq filed a proposal to make three 
changes to the opening process: (1) Applying the Market Opening Process 
at 8 a.m. rather than 9:25 as currently approved; (2) extending the 
availability of Total Day and Total Immediate or Cancel Orders to 8 
a.m. from 9:25, and adding the availability of Total Good-till-Canceled 
Orders during the same period; and (3) establishing a system default 
that protects market participants from unexpected executions upon the 
opening of Nasdaq's execution functionality at 8 a.m.\9\ According to 
Nasdaq, these modifications would provide a more efficient long-term 
solution, but they would take longer to implement than simply rejecting 
X Orders until 9:25. Nasdaq believes it is imperative to address the 
situation quickly and to simultaneously pursue a long-term solution.
---------------------------------------------------------------------------

    \9\ See SR-NASD-2005-009.
---------------------------------------------------------------------------

2. Statutory Basis
    Nasdaq believes that the proposed rule change, as amended, is 
consistent with the provisions of Section 15A of the Act,\10\ in 
general, and with Section 15A(b)(6) of the Act,\11\ in particular, in 
that Section 15A(b)(6) requires, among other things, that a national 
securities association's rules be designed to protect investors and the 
public interest. Nasdaq believes that its current proposal is 
consistent with the NASD's obligations under these provisions of the 
Act because it would result in a more orderly opening for all Nasdaq 
stocks. The proposed rule change, as amended, would create a fair, 
orderly, and unified opening for Nasdaq stocks, prevent the occurrence 
of locked and crossed markets in halted securities, and preserve price 
discovery and transparency that is vital to an effective opening of 
trading.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78o-3.
    \11\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change, as amended, 
would 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 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

    Because the foregoing proposed rule change, as amended, does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, if 
consistent with the protection of investors and the public interest, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \12\ 
and Rule 19b-4(f)(6) thereunder.\13\ Nasdaq has requested that the 
Commission waive the five-day pre-filing notice requirement and the 30-
day operative delay for ``non-controversial'' proposals, based upon a 
representation that the proposal is of the utmost importance to the 
fair and orderly operation of The Nasdaq Stock Market during the pre-
opening trading period. The Commission believes that waiver of

[[Page 9406]]

the five-day pre-filing requirement and the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow Nasdaq to continue the pilot without 
interruption. For this reason, the Commission designates the proposal 
to be effective and operative upon filing with the Commission.\14\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ For purposes only of waiving the 30-day operative delay of 
the proposed rule change, the Commission considered the proposed 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:
Electronic Comments
     Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASD-2005-017 on the subject line.
Paper Comments
     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NASD-2005-017. 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 (https://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 Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the NASD. 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 SR-NASD-2005-017 and should be submitted on or before March 
18, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E5-771 Filed 2-24-05; 8:45 am]
BILLING CODE 8010-01-P

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