I. Introduction
On October 16, 2000, the Pacific Exchange, Inc. (“PCX”) submitted to the Securities and Exchange Commission (“Commission” or “SEC”) a request to expand the maximum number of Nasdaq National Market (“Nasdaq/NM”) securities eligible for trading 2 pursuant to the Joint Transaction Reporting Plan for the Nasdaq/National Market Securities Traded on an Exchange on an Unlisted or Listed Basis (“Plan”).3 The current maximum number of eligible Nasdaq/NM securities that may be traded pursuant to UTP is 1000 securities.4 The Commission is soliciting comment on whether to expand the number of eligible Nasdaq/NM securities that may be traded by a national securities exchange pursuant to the Plan to include all Nasdaq/NM securities.
See Letter from Thomas E. Connaghan, Senior Vice President Equities, PCX, to Mr. Robert L.D. Colby, Deputy Director, Division of Market Regulation, SEC, and Mr. Robert Aber, Senior Vice President and General Counsel, The Nasdaq Stock Market, Inc. (“Nasdaq”) (Oct. 16, 2000).
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. 781(f). Section 12(f) required exchanges to apply to The Commission before extending UTP to any security. 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 pursuant 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 signatories to the Plan, i.e., the National Association of Securities Dealers, Inc. (“NASD”), the Boston Stock Exchange, Inc. (“BSE”), the Chicago Stock Exchange, Inc. (“CHX”) (previously, the Midwest Stock Exchange, Inc.), the Philadelphia Stock Exchange, Inc. (“PHLX”), the PCX, and the Cincinnati Stock Exchange (“CSE”) 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.
Exchange trading in Nasdaq/NM securities began in April 1987 when the CHX began trading 25 Nasdaq/NM securities. See Securities Exchange Act Release No. 24406 (April 29, 1987), 52 FR 17495 (May 8, 1987). The Commission increased the maximum number of eligible securities from 25 to 100 in 1991, from 100 to 500 in 1995, in response to a request from the CHX, and from 500 to the current 1000 limit in 1999, again in response to a request from the CHX. See Securities Exchange Act Release No. 28146 (June 26, 1990), 55 FR 27917 (July 6, 1990); Securities Exchange Act Release No. 36102 (Aug. 14, 1995), 60 FR 43626 (Aug. 22, 1995); and Securities Exchange Act Release No. 41392 (May 12, 1999), 64 FR 27839 (May 21, 1999).
II. Background
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. The Commission approved trading pursuant to the Plan on a one-year pilot basis, with the pilot period to commence when trasnaction reporting pursuant to the Plan commenced. The Commission originally approved the Plan on June 26, 1990.6 Accordingly, the pilot period commenced on July 12, 1993 and was scheduled to expire on July 12, 1994.7 The Plan has since been in operation on an extended pilot basis.8
See Section 12(f)(2) of the Act. 15 U.S.C. 781(f)(2).
See Securities Exchange Act Release No. 28146 (June 26, 1990), 55 FR 27917 (July 6, 1990).
See Letter from David R. Rusoff, Foley & Lardner, to Betsy Prout, Division of Market Regulation. (May 9, 1994).
See Securities Exchange Act Release No. 34371 (July 13, 1994), 59 FR 37103 (July 20, 1994); Securities Exchange Act Release No. 35221 (Jan. 11, 1995), 60 FR 3886 (Jan 19, 1995); Securities Exchange Act Release No. 36102 (Aug. 14, 1995), 60 FR 43626 (Aug. 22, 1995); Securities Exchange Act Release No. 36226 (Sept. 13, 1995), 60 FR 49029 (Sept. 21, 1995); Securities Exchange Act Release No. 36368 (Oct. 13, 1995); 60 FR 54091 (Oct. 19, 1995); Securities Exchange Act Release No. 36481 (Nov. 13, 1995), 60 FR 58119 (Nov. 24, 1995); Securities Exchange Act Release No. 36589 (Dec. 13, 1995), 60 FR 65696 (Dec. 20, 1995); Securities Exchange Act Release No. 36650 (Dec. 28, 1995), 61 FR 358 (Jan. 4, 1996); Securities Exchange Act Release No. 36934 (Mar. 6, 1996), 61 FR 10408 (Mar. 13, 1996); Securities Exchange Act Release No. 36985 (Mar. 18, 1996), 61 FR 12122 (Mar. 25, 1996); Securities Exchange Act Release No. 37689 (Sept. 16, 1996), 61 FR 50058 (Sept. 24, 1996); Securities Exchange Act Release No. 37772 (Oct. 1, 1996), 61 FR 52980 (Oct. 9, 1996); Securities Exchange Act Release No. 38457 (Mar. 31, 1997), 62 FR 16880 (Apr. 8, 1997); Securities Exchange Act Release No. 38794 (June 30, 1997), 62 FR 36586 (July 8, 1997); Securities Exchange Act Release No. 39505 (Dec. 31, 1997) 63 FR 1515 (Jan. 9, 1998); Securities Exchange Act Release No. 40151 (July 1, 1998), 63 FR 36979 (July 8, 1998); Securities Exchange Act Release No. 40896 (Dec. 31, 1998), 64 FR 1834 (Jan. 12, 1999); Securities Exchange Act Release No. 41392 (May 12, 1999), 64 FR 27839 (May 21, 1999); and Securities Exchange Act Release No. 42268 (Dec. 23, 1999), 65 FR 1202 (Jan. 6, 2000).
III. Description of the Plan
The Plan provides for the collection from Plan Participants and the consolidation and dissemination to vendors, subscribers and others of quotation and transaction information in “eligible securities.” 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 Contemplated 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.
The full text of the Plan, as well as “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.
IV. Description of the Proposal
The Commission is proposing pursuant to Section 12(f) of the Act to expand the number of eligible Nasdaq/NM securities that may be traded by a national securities exchange pursuant to the Plan to include all Nasdaq/NM securities. The current maximum number of eligible Nasdaq/NM securities that may be traded pursuant to the Plan is 1000 securities.
See supra note 4.
V. Solicitation of Comments
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether it it 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 change that are filed with the Commission, and all written communications relating to the proposal 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 December 8, 2000.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.12
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-29446 Filed 11-16-8:45am]
BILLING CODE 8010-01-M