[Federal Register: June 10, 2002 (Volume 67, Number 111)]
[Notices]
[Page 39768-39769]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10jn02-127]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46013; File No. SR-NASD-2002-55]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Granting Approval to a Proposed Rule Change
Relating to the Minimum Life of Directed Orders in Nasdaq's
SuperMontage System and the Minimum Life of SelectNet Orders
May 31, 2002.
On April 18, 2002, the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association''), through its subsidiary, the Nasdaq
Stock Market, Inc. (``Nasdaq''), filed with the Securities and Exchange
Commission (``Commission''), pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to: (1) Establish a minimum life
of five seconds for Directed Orders in Nasdaq's future Order Display
and Collector Facility (``NNMS'' or ``SuperMontage''), and (2) reduce
from ten seconds to five seconds the minimum time period before an
order entered into Nasdaq's SelectNet system may be cancelled by the
entering party. The proposed rule change was published for comment in
the Federal Register on May 1, 2002.\3\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 45813 (April 24,
2002), 67 FR 21792.
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The Commission received one comment regarding the proposal.\4\
According to this one commenter, the reduction from ten seconds to five
seconds of the minimum life of SelectNet orders was both justified and
beneficial, and would reduce opportunity costs as well as increase
market efficiency. The commenter also believes that, ``[b]ased on the
current performance of the SelectNet system, the risk of rejected
executions with a 5 second delay is almost zero. [Further, c]urrent
SelectNet performance levels justify further cutting the delay down to
as little as one second.''
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\4\ See e-mail comment from Joshua Levine to rule-
comments@sec.gov, Commission, dated May 15, 2002.
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The Commission finds that the proposed rule change is consistent
with the requirements of section 15A of the Act \5\ and the rules and
regulations thereunder. Specifically, the Commission finds that the
proposed rule change is consistent with Section 15(A)(b)(6),\6\ which
provides that the rules of the association be designed to promote just
and equitable principals of trade, to foster cooperation and
coordination with person engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to 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. Nasdaq represents that the
average time for a SelectNet order to be delivered to a recipient is
0.5 seconds, and that this standard will be maintained with Directed
Orders in SuperMontage.\7\ The Commission finds that the proposal to
establish a minimum life of five seconds for Directed Orders in
SuperMontage is consistent with section 15A(b)(6) of the Act \8\
because it should provide market participants with a reasonable
opportunity to respond to incoming orders before they are cancelled,
while
[[Page 39769]]
limiting the exposure of order senders to potential inferior execution
in a volatile market. In addition, the Commission finds that
establishing a five-second minimum life period for both Directed Orders
in SuperMontage and for SelectNet orders should help to provide clarity
and uniformity of minimum order life parameters across both systems
during the phase-in period.\9\ Nasdaq expects to implement both rule
changes on July 1, 2002.
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\5\ 15 U.S.C. 78o-3.
\6\ 15 U.S.C. 78o-3(b)(6).
\7\ Telephone conversation between Thomas Moran, Associate
General Counsel, Nasdaq, and Sapna C. Patel, Attorney, Division of
Market Regulation, Commission, on May 31, 2002.
\8\ 15 U.S.C. 78o-3(b)(6).
\9\ Nasdaq intends to introduce SuperMontage through a phased
roll-out process where limited numbers of securities will transition
to trading in the new SuperMontage environment under new rules,
while the remainder will continue to trade in Nasdaq's current
environment. Nasdaq represents that, during this transition, both
SuperMontage and SelectNet will continue to operate, and a single
uniform minimum order cancellation time parameter will be needed to
govern both systems.
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For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and rules
and regulations thereunder.
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-NASD-2002-55) is approved.
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\10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-14431 Filed 6-7-02; 8:45 am]
BILLING CODE 8010-01-P