14310 Federal Register / Vol. 60, No. 51 / Thursday, March 16, 1995 / Notices

1The NASD originally submitted the proposed

rule change on February 21, 1995. As a result of

discussions on March 6, 1995, between the

Commission staff and the NASD certain minor

amendments to the filing were agreed upon. This

notice reflects those amendments.

2Operation of ITS/CAES is governed by a

national market system plan known as the ‘‘Plan for

the Purpose of Creating and Operating an

Intermarket Communications Linkage pursuant to

ADDITIONAL INFORMATION OR COMMENTS:

Copies of the form and supporting

documents can be obtained from Chuck

Mierzwa, the agency clearance officer

(312–751–3363). Comments regarding

the information collection should be

addressed to Ronald J. Hodapp, Railroad

Retirement Board, 844 North Rush

Street, Chicago, Illinois 60611–2092 and

the OMB reviewer, Laura Oliven (202–

395–7316), Office of Management and

Budget, Room 10230, New Executive

Office Building, Washington, D.C.

20503.

Chuck Mierzwa,

Clearance Officer.

[FR Doc. 95–6492 Filed 3–15–95; 8:45 am]

BILLING CODE 7905–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–35471; File No. SR–NASD–

95–9]

Self-Regulatory Organizations; Notice

of Proposed Rule Change by National

Association of Securities Dealers, Inc.,

Relating to the Trading of ExchangeListed Securities in the Over-theCounter Market

March 10, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on March 6, 1995, the

National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘Association’’)

filed with the Securities and Exchange

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

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the NASD.1 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

The NASD is proposing to make three

significant changes to rules governing

NASD members’ over-the-counter

(‘‘OTC’’) trading in exchange-listed

securities. First, the NASD proposes to

require NASD members registered as

Consolidated Quotations Service

(‘‘CQS’’) market makers to display

certain customer limit orders in their

quotes. Second, the NASD proposes to

prohibit NASD members who are not

Intermarket Trading System/Computer

Assisted Execution System Automated

Interface (‘‘ITS/CAES’’) market makers

from effecting a transaction in any ITS/

CAES-eligible security that ‘‘tradesthrough’’ (i.e., a purchase below the

lowest bid or a sell above the highest

offer) the best bid or offer displayed by

any ITS/CAES market maker or any ITS

Participant Exchange in that stock.

Third, the NASD proposes to require all

NASD members executing customer

orders in ITS-eligible securities to afford

such orders some opportunity for price

improvement.

The full text of the proposed rule

change is set forth below. (New

language is italicized.)

Schedule D

PART VI

CONSOLIDATED QUOTATIONS SERVICE

(CQS)

Sec. 2. Obligations of CQS Market Makers

(a) No Change

(b) No Change

(c) A CQS market maker shall be required

to process customer limit orders in securities

eligible for inclusion on the ITS/CAES

linkage in the following manner:

(i) if the limit order is for 500 shares or less,

the CQS market maker either must execute

the limit order immediately or display it in

its quotation with a minimum size of 500

shares (unless the specified minimum for

that security is less than 500 shares); or

(ii) if the limit order is for greater than 500

shares, the order’s price must be reflected in

the market maker’s quotation, provided

however, that if the size displayed with that

updated quotation price is less than the limit

order’s size, the balance of the limit order

must be executed at a price at least as

favorable as the displayed price.

* * * * *

Schedule G

* * * * *

Sec. 1. Definitions

* * * * *

(g) The terms ‘‘Participant Market,’’ ‘‘ITS

System,’’ ’’ITS/CAES Market Maker,’’ and

‘‘ITS Security’’ shall have the same meanings

as set forth in section (a) of The Rules of

Practice and Procedure for Intermarket

Trading System/Computer Assisted

Execution System Automated Interface.

* * * * *

Sec. 4. Trading Practices

* * * * *

(j) No member shall effect a trade in a

security eligible for inclusion in the ITS/

CAES Linkage, whether as principal or agent,

at a price that is lower than the best bid or

higher than the best offer currently displayed

by an ITS/CAES Market maker or another

Participant market (hereinafter referred to as

a ‘‘trade-through’’) between 9:30 a.m. and

4:00 p.m. Eastern Standard Time (or such

shorter period of time coinciding with the

time that the primary market for a particular

ITS/CAES security is open) unless one of the

following conditions exists: (1) the size of the

bid or offer that is traded through is for 100

shares; (2) the transaction that constitutes the

trade-through is not a ‘‘regular way’’

contract; (3) the bid or offer that is tradedthrough is being displayed from a Participant

Market whose members are relieved of their

obligations under paragraph (c)(2) of

Securities Exchange Act Rule 11Ac1–1 with

respect to such bid of offer; or (4) the bid or

offer that is traded-through has caused a

locked or crossed market in the affected ITS

Security. The foregoing requirements shall

not apply to trade-throughs effected by ITS/

CAES Market Makers and governed by

Sections (h)(1)(A)–(H) of the ITS/CAES Rules.

(k) Between 9:30 a.m. and 4:00 p.m.

Eastern Standard Time (or such shorter

period of time coinciding with the time that

the primary market for a particular ITSeligible security is open), no member shall

accept customer orders in securities eligible

for inclusion in the ITS System for execution

in the over-the-counter market, either as

agent or principal, unless the member affords

such orders some opportunity for price

improvement over the best bid (in the case of

a retail sell order) or best offer (in the case

of a retail buy order) prevailing among the

Participant Markets in the ITS System. A

member can satisfy this requirement either by

a manual procedure or an algorithm built

into its internal order processing system. The

specific parameters for granting price

improvement at a member firm will be

determined by competitive forces and the

business judgment of the firm’s management.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

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. The 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

This proposal is intended to respond

to specific recommendations contained

in the SEC’s Market 2000 Report for

improving the efficiency and

effectiveness of the OTC dealer markets

in exchange-listed securities, including

ITS/CAES eligible securities.2 The
Federal Register / Vol. 60, No. 51 / Thursday, March 16, 1995 / Notices 14311

Section 11A(a)(3)(B) of the Securities Exchange Act

of 1934 (‘‘Act’’)’’ (hereinafter referred to as the ‘‘ITS

Plan’’). Under the ITS Plan, NASD members

participating as ITS/CAES market makers must

confine their market making to ‘‘Rule 19c–3

securities.’’ This grouping consists of securities that

were (1) not traded on a national securities

exchange prior to April 26, 1979 or (2) traded on

such an exchange on April 26, 1979, but thereafter

ceased to be traded on an exchange for some period

of time.

3At the present time, the NASD has not

designated any CQS security as subject to a

minimum quotation size of 200 shares.

4As discussed infra at note 6 and accompanying

text, all CQS market makers in ITS/CAES-eligible

securities must now be registered as ITS/CAES

Market Makers.

5CAES is an automated system regulated by the

NASD and operated by The Nasdaq Stock Market,

Inc. that allows NASD members to direct agency

orders (and principal orders with this rule change)

in exchange-listed securities to CAES for automated

execution in the third market. CAES market makers

are CQS market makers who have registered as

CAES market makers.

6See Securities Exchange Act Release No. 34280

(June 29, 1994); 59 FR 34880 (July 7, 1994). This

requirement took effect on October 31, 1994.

7 In order to comply with the trade-through

prohibition, a member firm would need to access

a CQS display on its Nasdaq Workstation device or

subscribe to a vendor service offering equivalent

display capabilities. From a surveillance

perspective, the NASD would develop an exception

report capable of identifying trade-throughs that

constituted violations of the proposed rule.

8See Securities Exchange Act Rule 11Ac1–1.

9Accordingly, this price improvement

requirement would cover all non Rule 19c–3

securities as well as all Rule 19c–3 securities.

instant proposal would effect the

following changes in selected NASD

rules governing members’ OTC trading

in exchange-listed securities.

1. Display of Customer Limit Orders

Part VI of Schedule D to the NASD

By-Laws establishes various regulations

applicable to member firms that utilize

the CQS to support their OTC market

making in exchange-listed securities.

Under the proposal, new Section 2(c)

would specify the circumstances in

which a CQS market maker in an ITS/

CAES eligible security would be

required to reflect customer limit orders

in the firm’s displayed CQS quotation.

First, for customer limit orders of 500

shares or less, a CQS market maker

would be required either to provide an

immediate execution at the limit price

or update its CQS quotation to reflect

the customer’s by/sell interest at the

limit price. The size associated with that

quotation must be 500 shares unless the

NASD has designated a lower minimum

size for CQS quotations in that

particular security.3 (This would be true

even if, for example, the pending limit

order were only for 200 shares.) Second,

if a customer’s limit order exceeds 500

shares, the market maker must update

its CQS quotation to reflect the superior

price of the customer limit order. If the

market maker elects not to reflect the

entire size of the pending limit order in

the firm’s updated quotation, the

balance of the limit order must be

executed at a price at least as favorable

as the displayed price. In sum, this

modification would result in the

exposure of customer limit orders in

ITS/CAES eligible securities to other

CQS market makers as well as exchange

specialists who would have the ability

to interact with such orders through the

ITS/CAES Linkage 4 or CAES.5

2. Trade-Through Prohibition

The proposal also contains two

substantive changes to NASD trading

practice regulations applicable to

members effecting OTC trades in ITS/

CAES securities. The first addresses the

possibility of a member firm effecting an

OTC trade in a ITS/CAES eligible

security at a price inferior to a displayed

market for that security in the ITS

system. Currently, NASD regulations in

this area only cover members that have

registered as ITS/CAES market makers

pursuant to the NASD Rules of Practice

and Procedure for the Intermarket

Trading System/Computer Assisted

Execution System Automated Interface

(‘‘ITS/CAES Rules’’). The proposed

prohibition would apply to all member

firms that effect trades in ITS/CAES

eligible securities without being

registered as ITS/CAES market makers

in those securities, e.g., block

positioning firms and order-entry firms.

It would also apply to the remote

circumstance where a registered ITS/

CAES market maker effects a tradethrough in an ITS/CAES eligible

security in which the firm does not

maintain a market making position.

The NASD expects that instances of

trade-throughs by its members should

diminish with the recent

implementation of an NASD

requirement that all CQS market makers

in ITS/CAES eligible securities become

registered as ITS/CAES market makers

pursuant to the ITS/CAES Rules.6

Nevertheless, it is still possible for an

NASD member who is not a registered

ITS/CAES market maker to effect a trade

in an ITS/CAES eligible security at a

price that constitutes a trade-through

under the ITS/CAES Rules.7

Accordingly, the proposed rule would

prohibit such conduct, unless the

circumstances satisfied one of the four

exceptions contained in the proposal:

(1) the size of the market traded-through

was 100 shares; (2) the transaction itself

is not for regular-way settlement (e.g., a

‘‘cash’’ transaction settling the same

day); (3) the bid/offer traded-through

emanated from a market whose

members are relieved of their

obligations under the SEC’s Firm Quote

Rule; 8 or (4) the bid/offer traded

through had caused a locked/crossed

market condition in the affected

security. (These four exceptions also

exist under the ITS/CAES Rules

applicable to ITS/CAES market makers.)

In addition, the proposed trade-through

rule would apply only between 9:30

a.m. and 4:00 p.m. Eastern Standard

Time (‘‘E.S.T.’’), or such short period of

time coinciding with time that the

primary market for a particular ITS/

CAES security is open.

Essentially, the proposed tradethrough prohibition impacts only those

NASD members that conduct business

in Rule 19c–3 securities without being

registered as ITS/CAES market makers

in those issues. As such, these firms

cannot avail themselves of the

procedural mechanisms prescribed by

the ITS/CAES rules for resolving intermarket complaints of trade-throughs by

providing stock to another ITS

participant. For this reason, the NASD

will regard a violation of the proposed

prohibition as a course of conduct

warranting referral to the NASD’s

Market Surveillance Committee for

possible disciplinary action. The NASD

will not, however, compel the offending

member to provide satisfaction to any

ITS participant that was traded-through,

even if the latter promptly complains

and requests satisfaction. This result is

appropriate because the NASD does not

wish to compel members who

periodically trade ITS/CAES eligible

securities (whether as agent or

principal) to assume the obligations of

an ITS/CAES market makers as a

condition of continuing to trade such

securities. On the other hand, the tradethrough prohibition is designed to

ensure that non-ITS/CAES market

makers will not ignore the superior bids

or offers in Rule 19c–3 securities that

may be displayed by ITS/CAES market

makers or exchange participants in the

ITS System.

3. Price Improvement

The second substantive change

involving Section 4 of Schedule G

relates to price improvement respecting

retail orders executed OTC in securities

eligible for inclusion in the ITS

System.9 This initiative also responds to

a recommendation contained in the

SEC’s Market 2000 Report. Basically,

new Section 4(k) in Schedule G would

require that members executing market

orders from retail customers in ITSeligible securities (either as principal or

agent) afford such orders some

opportunity for price improvement, i.e.,
14312 Federal Register / Vol. 60, No. 51 / Thursday, March 16, 1995 / Notices

an execution at a price superior to the

best bid or offer currently reflected in

the ITS System. It is the NASD’s

understanding that most firms trading

exchange-listed securities in the OTC

market already provide some form of

price improvement opportunity,

depending on factors such as order size

and the trading characteristics of the

particular security, and that there is no

uniform way to achieve price

improvement. This is to be expected as

affording customers price improvement

opportunities is driven by competitive

considerations to attract and retain

order flow from order entry firms. Thus,

in light of the varied means by which

firms offer price improvement and the

competitive nature of price

improvement, the NASD has concluded

that it would be too limiting and

restrictive for the NASD to mandate and

articulate specific parameters for

granting price improvement to

individual orders in ITS-eligible

securities. Rather, the NASD believes

that it is sufficient to adopt a more

generalized provision specifying that

members must afford some opportunity

for price improvement in executing

customer orders in exchange-listed

securities. Accordingly, under the

proposal, price improvement, at a

minimum, would have to involve either

exposing customer orders to an

algorithm incorporated into the firms’

in-house execution system or manually

reviewing incoming orders prior to their

execution. The NASD believes that this

flexible approach to mandating price

improvement is appropriate and that

firms should be encouraged to

experiment with the specific parameters

for granting price improvement. In

addition, the proposed price

improvement requirement would apply

only between 9:30 a.m. and 4:00 p.m.

E.S.T., or such shorter period of time

coinciding with the time that the

primary market for a particular ITSeligible security is open.

The NASD believes that this proposed

rule change is consistent with the

requirements of Sections 11A(a)(1) and

15A(b)(6) of the Act. Section 11A(a)(1)

specifies the Congressional findings and

objectives for a national market system.

These include the fostering of

economically efficient execution of

securities transactions; the promotion of

fair competition among brokers and

dealers, and between exchange markets

and over-the-counter securities markets;

and facilitating the best execution of

customers’ orders. Section 15A(b)(6)

requires, among other things, that the

NASD’s rules be designed to promote

just and equitable principles of trade;

foster cooperation and coordination

with persons engaged in regulating and

facilitating securities transactions;

remove impediments to and perfect the

mechanisms of the national market

system; and in general to protect

investors and the public interest. The

NASD submits that its proposal will

advance these objectives by facilitating

the prompt execution of customer limit

orders in ITS/CAES eligible securities in

circumstances where the limit price is

superior to the best bid/offer reflected in

the ITS System; by curbing instances of

trade-throughs in such securities by

broker-dealers that are NASD members,

but are not registered as ITS/CAES

market makers in the affected securities;

and by mandating all firms that accept

and execute customer orders in

securities eligible for inclusion in the

ITS System provide some opportunity

for price improvement in the execution

of such orders. Collectively, these

changes will enhance the protections

afforded investors trading exchangelisted securities in the OTC market and

promote the integrity, fairness and price

discovery process of the OTC market for

exchange-listed securities. These rule

changes also will facilitate the execution

of investors’ orders in exchange-listed

securities in the OTC market at the best

available price; regardless of whether

that price emanates from an exchange

participant in ITS or an ITS/CAES

market maker. Moreover, the new tradethrough prohibition will diminish the

confusion that occasionally results

when the Consolidated Tape reflects a

trade-through by an NASD member firm

which is not registered as an ITS/CAES

market maker.

Furthermore, because the NASD

believes these proposals are responsive

to specific recommendations made in

the SEC’s Market 2000 Report and

because the NASD has addressed or

responded to all of the other

recommendations in the Report

concerning trading in the third market,

the NASD believes the SEC should take

prompt action to expand the ITS/CAES

Linkage to include non-Rule 19c–3

securities. Requiring NASD members to

adhere to these new rules without

expanding the ITS/CAES linkage would

be particularly burdensome and unfair

given that NASD members will be

obligated to comply with these new

rules and automated access to the

primary markets for non-19c–3

securities through ITS will facilitate

compliance with these rules by NASD

members. If the ITS/CAES linkage were

expanded to include all ITS-eligible

securities, the NASD would

correspondingly propose to expand the

scope of the proposed trade-through

rule and the limit order display rule to

apply to all ITS-eligible securities.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD believes that the proposed

rule change will not 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

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 the 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.

Persons making written submissions

should fix six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. 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 refer to the file

number in the caption above and should

be submitted by April 6, 1995.
Federal Register / Vol. 60, No. 51 / Thursday, March 16, 1995 / Notices 14313

10 17 CFR 200.30–3(a)(12).

1The MUNICIPAL SECURITIES INFORMATION

LIBRARY system and the MSIL system are

trademarks of the Board. The MSIL system, which

was approved in Securities Exchange Act Release

No. 29298 (June 13, 1991) 56 FR 28194, is a central

facility through which information about municipal

securities is collected, stored and disseminated.

2Securities Exchange Act Release No. 30556

(April 6, 1992), 57 FR 12534. A complete

description of the CDI system is contained in File

No. SR–MSRB–90–4, Amendment No. 1.

3On May 17, 1993, the Board reported to the

Commission on the initial phase of operation of the

CDI system regarding technical, policy and cost

issues and proposed enhancements to the system.

4Securities Exchange Act Release No. 32825

(September 1, 1993), 58 FR 47306.

5Securities Exchange Act Release No. 34961

(November 10, 1994), 59 FR 59590. This provision

of the Rule will become effective on July 3, 1995.

6The effective date of this provision of the Rule

is January 1, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–6504 Filed 3–15–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35467; File No. SR–MSRB–

95–1]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Municipal

Securities Rulemaking Board Relating

to an Extension of the CDI Pilot

System from April 6, 1995 Through

December 31, 1995

March 10, 1995.

On March 7, 1995, the Municipal

Securities Rulemaking Board (‘‘Board’’

or ‘‘MSRB’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) a proposed

rule change (File No. SR–MSRB–95–1),

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), and Rule

19b–4 thereunder. The proposed rule

change is described in Items I, II, and III

below, which Items have been prepared

by the Board. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested people. The Board has

requested accelerated approval of the

proposed rule change in order to permit

the Pilot system to continue to operate

without interruption.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Board is filing herewith a

proposed rule change to request an

extension, from April 6, 1995, through

December 31, 1995, of its Continuing

Disclosure Information (‘‘CDI’’) Pilot

system of the Municipal Securities

Information Library (MSIL) system.1

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

Board 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. The Board 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

(a) On April 6, 1992, the SEC

approved the CDI Pilot system for an 18-

month period.2 The CDI Pilot system

began operating on January 23, 1993,

and functions as part of the Board’s

MSIL system. The CDI Pilot system

accepts and disseminates voluntary

submissions of official disclosure

notices relating to outstanding issues of

municipal securities, i.e., continuing

disclosure information. During its first

phase of operation, the system accepted

disclosure notices only from trustees.

On May 17, 1993, the Pilot system also

began accepting notices from issuers.3

On September 1, 1993, the Commission

approved an 18-month extension of the

Pilot system, which extension will

expire on April 6, 1995.4

On November 10, 1994, the

Commission approved amendments to

its Rule 15c2–12 which prohibit a dealer

from underwriting a new issue of

municipal securities unless the issuer

commits, among other things, to provide

material events notices to the Board’s

CDI Pilot system or to all Nationally

Recognized Municipal Securities

Information Repositories (‘‘NRMSIRs’’)

and to the applicable state information

depository.5 In addition, the Rule

prohibits a dealer from recommending

the purchase or sale of a municipal

security unless the dealer has in place

procedures that provide reasonable

assurance that it will receive prompt

notice of material events.6 The Board is

considering certain changes to the CDI

Pilot system consistent with the new

Commission requirements, including

reconsideration of certain issuer and

trustee enrollment procedures and page

limits on submissions.

The Board believes that an extension

of the operation of the CDI Pilot system

will give it sufficient time to determine

the system changes needed, in

consultation with the Commission as

well as potential users of the system,

including NRMSIRs. We anticipate

filing system changes well before the

December 31, 1995, extension date. At

that time, the Board also plans to ask the

Commission for permanent approval of

the revised CDI system.

(b) The Board believes the proposed

rule change is consistent with Section

15B(b)(2)(C) of the Act, which provides

that the Board’s rules shall:

Be designed to prevent fraudulent and

manipulative acts and practices, to promote

just and equitable principles of trade, to

foster cooperation and coordination with

persons engaged in regulating, clearing,

settling, processing information with respect

to, and facilitating transactions in municipal

securities, to remove impediments to and

perfect the mechanism of a free and open

market in municipal securities, and, in

general, to protect investors and the public

interest.

The MSIL system is designed to

increase the integrity and efficiency of

the municipal securities market by,

among other things, helping to ensure

that the price charged for an issue in the

secondary market reflects all available

official information about that issue.

The Board will continue to operate the

output of the CDI Pilot system to ensure

that the information is available to any

party who wishes to subscribe to the

service. As with all MSIL system

services, this service is available, on

equal terms, to any party requesting the

service.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Board does not believe that the

proposed rule change will impose any

burden on competition 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

The Board has requested that the

Commission find good cause, pursuant

to Section 19(b)(2) of the Act, for

approving the proposed rule change

prior to the thirtieth day after