On January 13, 2006, the Securities and Exchange Commission (“Commission”) granted registration of the Nasdaq Stock Market LLC (“Nasdaq Exchange”) as a national securities exchange.
The Nasdaq Exchange would now prefer to commence trading Nasdaq UTP Plan Securities and CTA Plan Securities in two separate phases. Accordingly, by letter dated March 31, 2006, the Nasdaq Exchange requested that the Commission modify the Control Share Condition to allow it to begin operating as an exchange with regard to Nasdaq UTP Plan Securities before the Control Share Condition is satisfied.
As discussed in the Nasdaq Exchange Order,
In addition, with respect to CTA Plan Securities, NASD facilities owned by Nasdaq currently are the NASD's only means available to fulfill its obligations under Exchange Act Rules 602 and 603,
The Nasdaq Exchange represented that the technology solutions to allow the NASD to fulfill its obligations with respect to CTA Plan Securities through means that would not involve a delegation of regulatory authority to Nasdaq are not completed.
The Commission believes that a phased-in implementation of the operation of the Nasdaq Exchange is consistent with the Exchange Act and may allow for a more smooth transition. Accordingly, the Commission believes that it is necessary or appropriate in the public interest, consistent with the protection of investors and consistent with the requirements of Exchange Act, and the rules and regulations thereunder applicable to Nasdaq Exchange to modify the Control Share Condition to the Nasdaq Exchange Order as follows:
First, the requirement that the NASD represent that “control of Nasdaq through the Preferred D share is no longer necessary because the NASD can fulfill through other means its obligations with respect to [CTA Plan Securities] under Section 15A(b)(11) of the Exchange Act,
Second, the Control Share Condition is modified to permit the Nasdaq Exchange to commence trading Nasdaq UTP Plan Securities once Nasdaq is no longer delegated regulatory authority under the Delegation Plan with respect to such securities. The modification of the Control Share Condition described above means that the Nasdaq Exchange would commence trading in Nasdaq UTP Plan Securities while the NASD controls Nasdaq. The Commission believes, however, that it would be inappropriate for the Nasdaq Exchange to commence trading in Nasdaq UTP Plan Securities while its parent company continued to be delegated regulatory authority by the NASD with respect to the same activities. Accordingly, the Commission would have to approve an amendment to the NASD's Delegation Plan to reflect that Nasdaq would no longer be delegated regulatory authority with regard to Nasdaq UTP Securities prior to the Nasdaq Exchange commencing to trade Nasdaq UTP Plan Securities.
The Commission notes that all of the other conditions set forth in the Nasdaq Exchange Order remain and must be satisfied before the Nasdaq Exchange can begin operations as an exchange.
The Commission hereby replaces the Control Share Condition to operation of the Nasdaq Exchange as a national securities exchange as follows:
(1) With respect to the Nasdaq Exchange commencing to trade securities reported pursuant to the Nasdaq UTP Plan, the NASD's Delegation Plan is amended to eliminate Nasdaq's exercise of regulatory authority with respect to such securities.
(2) With respect only to the Nasdaq Exchange commencing to trade securities reported pursuant to the CTA Plan, the NASD must represent to the Commission that control of Nasdaq through the Preferred D share is no longer necessary because the NASD can fulfill through other means its obligations with respect to securities reported to the CTA Plan under Section 15A(b)(11) of the Exchange Act, Rules 602 and 603 of Regulation NMS, and the national market system plans in which the NASD participates.
By the Commission.