Federal Register / Vol. 69, No. 22 / Tuesday, February 3, 2004 / Notices 5229

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3 15 U.S.C. 78s(b)(3)(A).

4 17 CFR 240.19b–4(f)(6).

5See Securities Exchange Act Release No. 46249 

(July 24, 2002), 67 FR 49822 (July 31, 2002) (Order 

approving SR–NASD–2002–97 on a pilot basis).

6See Securities Exchange Act Release No. 47633 

(April 10, 2003), 68 FR 19043 (April 17, 2003) 

(Notice of Filing and Immediate Effectiveness of 

SR–NASD–2003–67).

7See Securities Exchange Act Release No. 43863 

(January 19, 2001), 66 FR 8020 (January 26, 2001) 

(File No. SR–NASD–99–53).

8See Securities Exchange Act Release No. 44396 

(June 7, 2001), 66 FR 31952 (June 13, 2001) (File 

No. 10–131).

9On January 30, 2003, NASD filed a proposed 

rule change with the Commission to revise the 

transaction and quotation-related fees applicable to 

ADF activity during the pilot program. This 

proposed rule change became effective upon filing, 

with an implementation date of February 17, 2003. 

See Securities Exchange Act Release No. 47331 

(February 10, 2003), 68 FR 7635 (February 14, 2003) 

(Notice of Filing and Immediate Effectiveness of 

SR–NASD–2003–09). On January 6, 2004, the 

Commission approved on an accelerated basis a 

proposal to amend NASD’s ADF pilot rules to give 

jurisdiction to a three-member subcommittee of 

NASD’s Market Regulation Committee (‘‘MRC’’) to 

review system outage determinations under NASD 

Rule 4300A(f) and excused withdrawal denials 

under NASD Rule 4619A. This proposed rule 

change became effective contemporaneous with the 

Commission’s approval. See Securities Exchange 

Act Release No. 49029 (January 6, 2004), 69 FR. 

2167 (January 14, 2004) (Order granting accelerated 

approval to SR–NASD–2003–145). On December 4, 

2003, NASD filed for immediate effectiveness a 

proposed rule change to amend NASD Rule 

4613A(c) to clarify that NASD may suspend 

quotations in ADF displayed by any market 

participant, including an ECN, that are no longer 

reasonably related to the prevailing market. See

Securities Exchange Act Release No. 49075 (January 

14, 2004) (Notice of Filing and Immediate 

Effectiveness of SR–NASD–2003–181). 

Additionally, NASD has two other rule changes that 

propose to amend ADF rules pending with the 

Commission. One proposed rule change would 

repeal NASD Rule 4613A(e)(1), which requires 

members that display priced quotations for a 

Nasdaq security in two or more market centers to 

display the same priced quotations for that security 

in each market center. See SR–NASD–2003–175. 

The second rule change proposes to amend NASD 

Rule 4300A to require an ADF Market Participant 

to provide advance written notice to NASD’s ADF 

Market Operations before denying electronic access 

to its ADF quote to any NASD member in the 

limited circumstances where a broker-dealer fails to 

pay contractually obligated costs for access to the 

Market Participant’s quotations. See SR–NASD–

2004–002.

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49131; File No. SR–NASD–

2004–12] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by the 

National Association of Securities 

Dealers, Inc. To Extend Operation of 

NASD’s Alternative Display Facility on 

a Pilot Basis 

January 27, 2004. 

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 

27, 2004, the National Association of 

Securities Dealers, Inc. (‘‘NASD’’ or 

‘‘Association’’) submitted to the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by NASD. NASD filed the proposal 

pursuant to Section 19(b)(3) of the Act,3

and Rule 19b–4(f)(6) thereunder,4 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 

NASD proposes to extend for nine 

months the operation of NASD’s 

Alternative Display Facility (‘‘ADF’’) on 

a pilot basis. The current ADF pilot 

program, which the Commission 

approved on July 24, 2002, will expire 

on January 26, 2004. The pilot permits 

members to quote and trade only 

Nasdaq-listed securities on or through 

the ADF. 

New text is italicized. Deleted text is 

in brackets.

* * * * *

4000A. NASD Alternative Display 

Facility 

4100A. General 

NASD Alternative Display Facility 

(‘‘ADF’’) is the facility to be operated by 

NASD on a pilot basis for members that 

choose to quote or effect trades in 

Nasdaq securities (‘‘ADF-eligible 

securities’’) otherwise than on Nasdaq 

or on an exchange. The ADF will collect 

and disseminate quotations, compare 

trades, and collect and disseminate 

trade reports. Those NASD members 

that utilize ADF systems for quotation 

or trading activities must comply with 

the Rule 4000A, Rule 5400 and Rule 

6000A Series, as well as all other 

applicable NASD Rules. The ADF pilot 

will expire on [January 26, 2004] 

October 26, 2004.

* * * * *

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NASD 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. NASD 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

On July 24, 2002, the Commission 

approved SR–NASD–2002–97,5 which 

authorized NASD to operate the ADF on 

a pilot basis for nine months, pending 

the anticipated approval of SR–NASD–

2001–90, which proposed to operate the 

ADF on a permanent basis. The ADF 

pilot was extended until January 26, 

2004 in SR–NASD–2003–67.6 As 

described in detail in SR–NASD–2001–

90, the ADF is a quotation collection, 

trade comparison, and trade reporting 

facility developed by NASD in 

accordance with the Commission’s 

SuperMontage Approval Order 7 and in 

conjunction with Nasdaq’s anticipated 

registration as a national securities 

exchange.8 In addition, since the 

Commission gave its initial approval to 

the ADF pilot, NASD has filed with the 

Commission several other proposed rule 

changes to amend the ADF’s rules, some 

of which have become effective and 

been incorporated into the operation 

and administration of the ADF pilot.9

As proposed in SR–NASD–2001–90, 

the ADF would provide market 

participants the ability to quote and 

trade Nasdaq and exchange-listed 

securities. The current ADF pilot 

program, however, permits operation of 

the ADF with respect to Nasdaq 

securities only. This is because several 

regulatory issues relating to the trading 

of exchange-listed securities on the ADF 

have not been resolved. 

According to NASD, the ADF has 

been operating successfully during the 

pilot period. NASD believes that the 

Commision, in approving the launch of 

SuperMontage, stated that the ADF met 

the conditions set forth in its 

SuperMontage Approval Order to 

provide an alternative quotation 

collection, trade comparison and trade 

reporting facility. The ADF has since 

continued to honor those conditions. 

NASD also notes that the issues related 

to trading exchange-listed securities—

and by extension, approval of the 

operation of ADF on a permanent 

basis—remain unresolved. Accordingly, 

NASD believes it is appropriate to 

extend the pilot period for ADF trading 

in Nasdaq securities—until October 26, 

5230 Federal Register / Vol. 69, No. 22 / Tuesday, February 3, 2004 / Notices 

10 15 U.S.C. 78o–3.

11 15 U.S.C. 78o–3.

12 15 U.S.C. 78s(b)(3)(A).

13 17 CFR 240.19b–4(f)(6).

14For purposes only of accelerating the operative 

date of this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f).

15 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2004 or until approval of SR–NASD–

2001–90.

2. Statutory Basis 

NASD believes that the proposed rule 

change is consistent with Section 

15A(b)(6) of the Act 10 which requires 

that the NASD have rules that prevent 

fraudulent and manipulative acts, 

promote just and equitable principles of 

trade, foster cooperation and 

coordination among persons engaged in 

regulating, clearing, settling, processing 

information and facilitating transactions 

in securities, remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. NASD 

further believes the proposed rule 

change is consistent with Section 

15A(b)(6)11 because it does not permit 

unfair discrimination between 

customers, issuers, brokers, or dealers, 

fix minimum profits, impose any 

schedule or fix rates of commissions, 

allowances, discounts, or other fees to 

be charged by members, or regulate 

matters not related to the purposes of 

the Act or the administration of NASD.

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Nasdaq 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. Written 

comments, however, were solicited on 

proposed rule changes SR–NASD–2001–

90 and SR–NASD–2002–28, the 

underlying rule filings to SR–NASD–

2002–97 and SR–NASD–2003–67, and 

SR–2003–09, respectively. NASD 

responded to the comments received in 

response to SR–NASD–2001–90 in its 

Amendment No. 2 to that filing 

submitted to the Commission on May 

24, 2002. NASD responded to the 

comments received in response to SR–

NASD–2002–28 in its Amendment No. 

1 to that filing submitted to the 

Commission on May 14, 2002. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 12 and subparagraph (f)(6) of 

Rule 19b–413 thereunder because it does 

not: (i) Significantly affect the 

protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate. 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.

NASD has requested that the 

Commission waive the 30-day operative 

delay to prevent the current ADF pilot 

program from lapsing. Under Rule 19–

4(f)(6) of the Act, a proposed rule 

change does not become operative for 30 

days after the date of filing, unless the 

Commission designates a shorter time. 

The Commission believes that waiving 

the 30-day operative delay is consistent 

with the protection of investors and the 

public interest. Acceleration of the 

operative date will ensure the 

uninterrupted operation of the ADF 

pilot until October 26, 2004. For this 

reason, the Commission waives the 30-

day operative delay and designates the 

proposal to be immediately effective 

and operative upon filing with the 

Commission.14

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. 

Persons making written submissions 

should file six copies thereof with the 

Secretary, Securities and Exchange 

Commission, 450 Fifth Street, NW, 

Washington, DC 20549–0609. 

Comments may also be submitted 

electronically at the following e-mail 

address: rule-comments@sec.gov. All 

comment letters should refer to File No. 

SR–NASD–2004–12. 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, comments 

should be sent in hardcopy or by e-mail 

but not by both methods. 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 the filing will also be 

available for inspection and copying at 

the principal office of the Association. 

All submissions should refer to File No. 

SR–NASD–2004–12 and should be 

submitted by February 24, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.15

Jill M. Peterson, 

Assistant Secretary.

[FR Doc. 04–2145 Filed 2–2–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49122; File No. SR–NSCC–

2003–23] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Fees 

January 23, 2004. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

January 2, 2004, the National Securities 

Clearing Corporation (‘‘NSCC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change described in Items 

I, II, and III below, which items have 

been prepared primarily by NSCC. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested parties.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The purpose of the proposed rule 

change is to (i) adjust the fees NSCC 

charges for trade recording, (ii) establish 

fees for the Cost Basis Reporting 

Service, and (iii) eliminate Archival 

Microfiche fees.