I. Introduction

On June 27, 2000, 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 Cincinnati Stock Exchange (“CSE”) and the Philadelphia Stock Exchange, Inc. (“Phlx”) submitted to the Securities and Exchange Commission (“Commission” or “SEC”) a proposal to extend the operation of 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] The proposal would extend the effectiveness of the Plan, as amended by Amendment No. 10, through March 31, 2001.^[3] The Commission also is extending certain exemptive relief as described below. The June 2000 Extension Request also request that the Commission approve the Plan, as amended, on a permanent basis on or before March 31, 2001. During the extension of the Plan, the Commission will consider whether to approve the proposed Plan, as amended, on a permanent basis.

II. Background

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 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. The Commission originally approved the Plan on June 26, 1990.^[5] Accordingly, the pilot period commenced on July 12, 1993 and was scheduled to expire on July 12, 1994.^[6] The Plan has since been in operation on an extended pilot basis.^[7]

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.” ^[8] 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 (“BBO”); Dispute Resolution; and Method of Determination and Imposition, and Amount of Fees and Charges.^[9]

IV. Exemptive Relief

In conjunction with the Plan, on a temporary basis, the Commission ( printed page 42412) granted an exemption to vendors from Rule 11Ac1-2 under the Act regarding the calculation of the BBO ^[10] and granted the BSE an exemption from the provision of Rule 11Aa3-1 under the Act that requires transaction reporting plans to include market identifiers for transaction reports and last sale data. As discussed further below in the Summary of Comments, the Participants ask in the June 2000 Extension Request that the Commission grant an extension of the exemptive relief described above to vendors until the BBO calculation issue is fully resolved. In addition, in the June 2000 Extension Request, the Participants request that the Commission grant an extension of the exemptive relief described above to the BSE for as long as the BSE is a Limited Participant under the Plan.

V. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether it is consistent with the Act. The Commission continues to solicit comment regarding the BBO calculation, the trade through rule and any issues presented by changes occurring in the market place. 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 communications relating to the proposal 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 July 31, 2000.

VI. Discussion

The Commission finds that an extension of temporary approval of the operation of the Plan, as amended, through March 31, 2001, is appropriate and in furtherance of Section 11A of the Act.^[11] The Commission believes that the extension will provide the Participants with additional time to seek Commission approval of pending proposals concerning the BBO calculation and to begin to make reasonable proposals concerning a trade through rule to facilitate the trading of OTC securities pursuant to UTP. With respect to a trade through rule, the Commission notes that it has recently expanded the ITS linkage to all securities, thereby expanding the coverage of the ITS trade through rule.^[12] While the Commission continues to solicit comment on these matters, the Commission believes that these matters should be addressed directly by the Participants on or before December 31, 2001 so that the Commission may have ample time to determine whether to approve the Plan on a permanent basis by March 31, 2001.

The Commission also finds that it is appropriate to extend the exemptive relief from Rule 11Ac1-2 under the Act until the earlier of March 31, 2001, or until such time as the calculation methodology of the BBO is based on a price/size/time algorithm pursuant to a mutual agreement among the Participants approved by the Commission. The Commission further finds that it is appropriate to extend the exemptive relief from Rule 11Aa3-1 under the Act, that requires transaction reporting plans to include market identifiers for transaction reports and last sale data, to the BSE through March 31, 2001. The Commission believes that the extensions of the exemptive relief provided to vendors and the BSE, respectively, are consistent with the Act, the Rules thereunder, and specifically with the objectives set forth in Sections 12(f) and 11A of the Act and in Rules 11Aa3-1 and 11Aa3-2 thereunder.

VII. Conclusion

It Is Therefore Ordered, pursuant to Section 12(f) and 11A of the Act and paragraph (c)(2) of Rule 11Aa3-2 thereunder, that the Participants' request to extend the effectiveness of the Joint Transaction Reporting Plan, as amended, for Nasdaq/National Market securities traded on an exchange on an unlisted or listed basis through March 31, 2001, and certain exemptive relief through March 31, 2001, is approved.