[Federal Register Volume 65, Number 4 (Thursday, January 6, 2000)]
[Notices]
[Pages 799-800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-279]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42269; File No. S7-24-89]


Joint Industry Plan; Solicitation of Comments and Order Approving 
Amendment No. 10 to Reporting Plan for Nasdaq/National Market 
Securities Traded on an Exchange on an Unlisted or Listed Basis, 
Submitted by the National Association of Securities Dealers, Inc., and 
the Boston, Chicago, Philadelphia and Cincinnati Stock Exchanges

December 23, 1999.

I. Introduction

    On December 6, 1999, 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''), and the Cincinnati 
Stock Exchange (``Cincinnati'') submitted to the Securities and 
Exchange Commission (``Commission'' or ``SEC'') Amendment No. 10 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 
Cincinnati as a Participant to the Plan and make technical changes to 
the Plan to reflect that the Midwest Stock Exchange now is called the 
Chicago Stock Exchange.
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    \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. 781(f). Section 12(f) required exchanges to apply to the 
Commission before extending UTP 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 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 
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.
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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\
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    \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 49029 (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 
No. 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''); and 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).
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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.'' \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 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.\8\
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    \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.
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IV. Discussion

    The Commission finds that it is consistent with Section 11A \9\ of 
the Act to add Cincinnati as a Participant to the Plan and to make 
technical changes to the Plan to reflect that the Midwest Stock 
Exchange is now called the Chicago 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

[[Page 800]]

maintenance of fair and orderly markets,'' and cites 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 regulatory surveillance of concurrent 
exchange and OTC trading.'' \11\ The Commission now finds that adding a 
Participant to the Plan furthers these same goals.
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    \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.
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    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. Cincinnati has filed an executed copy of the Plan with the 
Commission, and the Participants have represented to the Commission 
that Cincinnati has paid its share of the development costs specified 
in Section XIV of the Plan. Accordingly, the Commission finds that 
Cincinnati has satisfied the requirements listed in the Plan to become 
a participant.
    The Commission also finds that the technical amendments to the Plan 
are consistent with the Act. The Commission believes that the Plan 
should accurately reflect the Participants. Thus, it is appropriate 
that all references to the Midwest Stock Exchange are changed to the 
Chicago Stock Exchange, and that the Plan itself be modified to provide 
for a symbol for CHX.

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 NW, Washington, DC 
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 February 
10, 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. 
10 to the Plan, is approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(29).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-279 Filed 1-5-00; 8:45 am]
BILLING CODE 8010-01-M