5632 Federal Register / Vol. 69, No. 24 / Thursday, February 5, 2004 / Notices 

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 46249 (July 

24, 2002), 67 FR 49822 (July 31, 2002). Subsequent 

to the initial approval of the ADF rules, the 

Commission approved an extension of the pilot 

until January 26, 2004. Securities Exchange Act 

Release No. 47633 (April 10, 2003), 68 FR 19043 

(April 17, 2003).

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 should be submitted 

electronically at the following e-mail 

address: rule-comments@sec.gov. All 

comment letters should refer to File No. 

SR–NASD–2003–199. 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 hard copy 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 such filing will also be 

available for inspection and copying at 

the principal office of the NASD. All 

submissions should be submitted by 

February 26, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.6

Jill M. Peterson, 

Assistant Secretary.

[FR Doc. 04–2332 Filed 2–4–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49152; File No. SR–NASD–

2003–175] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change by 

the National Association of Securities 

Dealers, Inc. To Repeal Rule 

4613A(e)(1) Requiring Same-Priced 

Quotations on Multiple Markets 

January 29, 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 November 

26, 2003, the National Association of 

Securities Dealers, Inc. (‘‘NASD’’), 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 the NASD. 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 is proposing to repeal NASD 

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

members that display priced quotations 

for a Nasdaq security on multiple 

market centers to display the samepriced quotations on each market 

center. Below is the text of the proposed 

rule change. Proposed deletions are in 

brackets.

* * * * *

4613A. Character of Quotations 

(a) through (d) No change. 

(e) Other Quotation Obligations 

[(1) Members that display priced 

quotations on a real-time basis for 

Nasdaq securities in two or more market 

centers that permit quotation updates on 

a real-time basis must display the same 

priced quotations for the security in 

each market center.] 

[(2)] As required by Rule 11Ac1–2(e) 

under the Exchange Act, a member that 

uses an ADF terminal or other approved 

ADF electronic interface shall be 

obligated to have available in close 

proximity to the ADF terminal or 

interface a quotation service that 

disseminates the bid price and offer 

price from all markets trading that 

Nasdaq security.

* * * * *

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 

NASD is proposing to 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. Pursuant to this 

rule, members that choose to quote in 

multiple market centers are not 

permitted to display an inferior quote in 

any of those market centers. NASD Rule 

4613A(e)(1) was proposed as part of the 

Alternative Display Facility (‘‘ADF’’) 

pilot rules 3 because NASD believed it 

important to prevent fragmentation of 

quotations by a member (which might 

serve to undermine the transparency of 

the best quotes in the market), given the 

increased potential that members might 

choose to dual quote on several market 

centers, including ADF. This provision 

was modeled closely after NASD Rule 

2320(g)(2), which applies to over-thecounter (‘‘OTC’’) securities, such as 

those securities quoted through the OTC 

Bulletin Board and the Electronic Pink 

Sheets.

Since its adoption, NASD has 

monitored the impact of NASD Rule 

4613A(e)(1) and believes that the 

benefits of the same-priced quotation 

requirement to the trading in Nasdaq 

securities have been difficult to 

quantify. As an initial matter, NASD 

believes that the Commission’s vendor 

display rule (Rule 11Ac1–2 under the 

Act) makes NASD Rule 4613A(e)(1) less 

critical to preserving transparency in the 

market. NASD also believes that by 

generally requiring that vendors provide 

a consolidated display of quotation 

information for Nasdaq securities from 

all reporting market centers, the vendor 

display rule ensures that quotations 

from each market center are visible, 

thereby facilitating transparency in the 

market and best execution. However, 

since a similar vendor display provision 

does not apply to the OTC market, 

NASD believes that it is more important 

to require that members display the 

same priced quotation in multiple 

markets to preserve transparency in that 

marketplace. 

Further, NASD believes that NASD 

Rule 4613A(e)(1) has resulted in 

problems given recent market structure 

developments. For example, a member 

now may have several completely 

distinct business units, such as a market 

making unit and an electronic 

communications network (‘‘ECN’’), 

which are used by different types of 

clients and, therefore, represent separate 

Federal Register / Vol. 69, No. 24 / Thursday, February 5, 2004 / Notices 5633

4 15 U.S.C. 78o–3(b)(6). 5 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3With the permission of NYSE, the Commission 

has made typographical, non-substantive 

corrections to the text of the proposed rule change. 

See Telephone conversation between Annemarie 

Tierney, Assistant General Counsel, NYSE, and 

Susie Cho, Special Counsel, Division of Market 

Regulation (‘‘Division’’), Commission on January 

21, 2004.

4See Letter from Darla C. Stuckey, Corporate 

Secretary, NYSE, to Nancy J. Sanow, Assistant 

Director, Division, Commission, dated January 16, 

2004 (‘‘Amendment No. 1’’). Amendment No. 1 

replaced the original proposed rule change in its 

entirety.

5See Letter from Darla C. Stuckey, Corporate 

Secretary, NYSE, to Nancy J. Sanow, Assistant 

Director, Division, Commission, dated January 22, 

2004 (‘‘Amendment No. 2’’). Amendment No. 2

pools of liquidity. A member may 

choose to display quotations relating to 

its market-making unit on Nasdaq and 

its ECN on ADF. Under such 

circumstances, NASD believes that 

compliance with NASD Rule 

4613A(e)(1) would, in effect, require the 

member to consolidate these distinct 

business units for purposes of 

displaying quotations on each market, 

which would be contrary to the business 

model of the firm since these quotes 

represent separate liquidity pools. As an 

alternative, the member could establish 

separate broker/dealers for each 

business unit, which NASD believes is 

overly burdensome for members given 

the marginal benefits associated with 

NASD Rule 4613A(e)(1). 

For the reasons discussed above, the 

proposed rule change would repeal 

NASD Rule 4613A(e)(1). However, 

NASD represents that it will continue, 

as it currently does today, to monitor 

and surveil for any potentially collusive 

or manipulative conduct relating to 

quotation activity on markets under its 

regulatory authority.

2. Statutory Basis 

NASD believes that the proposed rule 

change is consistent with the provisions 

of section 15A(b)(6) of the Act,4 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 accomplishes 

these ends. In light of the Commission’s 

vendor display rule, NASD believes 

NASD Rule 4316A(e)(1) does not serve 

any additional beneficial purposes and 

may, in fact, interfere with competition 

and certain member’s business models.

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 

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 NASD 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 is consistent with the Act. In 

particular, the Commission solicits 

comment on (i) whether the proposed 

rule change will facilitate multiple 

quotations that erode SEC Rule 11Ac1–

1 and (ii) whether the proposed rule 

change will facilitate locking or crossing 

the quotes of other market centers. 

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–2003–175. 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 hard copy 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 such filing will also be 

available for inspection and copying at 

the principal office of NASD. 

All submissions should refer to File 

No. SR–NASD–2003–175 and should be 

submitted by February 26, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.5

J. Lynn Taylor, 

Assistant Secretary.

[FR Doc. 04–2361 Filed 2–4–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49154; File No. SR–NYSE–

2003–43] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change and 

Amendments Nos. 1 and 2 Thereto by 

the New York Stock Exchange, Inc. and 

Order Granting Accelerated Approval 

of the Proposed Rule Change To 

Establish a Pilot Program To Amend 

the Minimum Numerical Standards 

(Sections 102.01C, 103.01B, 802.01B, 

and 802.01C of the Listed Company 

Manual) 

January 29, 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 December 

22, 2003, the New York Stock Exchange, 

Inc. (‘‘NYSE’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I and II below, which Items 

have been prepared by the Exchange.3

On January 19, 2004, the NYSE 

submitted Amendment No. 1 to the 

proposed rule change.4 On January 23, 

2004, the NYSE submitted Amendment 

No. 2 to the proposed rule change.5 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, as amended, from interested 

persons. For the reasons discussed 

below, the Commission is granting 

accelerated approval of the proposed 

rule change on a six-month pilot basis.