Self-Regulatory Organizations; Order Granting Approval of Proposed Rule Change by the National Association of Securities Dealers, Inc. to Implement a Six-Month Pilot Program Establishing Fees for Written Interpretations of Nasdaq Listing Rules

On July 3, 2003, the National Association of Securities Dealers, Inc. (“NASD”), 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”), and Rule 19b-4 thereunder, a proposed rule change to implement a six-month pilot program to establish fees for written interpretations of Nasdaq listing rules. Notice of the proposed rule change was published for comment in the Federal Register on August 4, 2003. No comments were received on the proposed rule change. This order approves the proposed rule change.

Nasdaq currently provides written interpretations regarding the application of its listing rules to particular sets of facts, at no cost, to issuers who request them. According to Nasdaq, the transactions for which issuers are seeking interpretations have grown in complexity and have resulted in its staff spending an increased amount of time on interpretation letters. In order to address the associated costs, Nasdaq proposes to charge, on a six-month pilot basis, fees for providing written interpretations. Under the pilot, Nasdaq would charge $2,000 for interpretation letters, with a response generally provided within four weeks. Additionally, Nasdaq would charge a $10,000 fee for expedited interpretation letters, with a response generally provided within one to four weeks. Nasdaq would not impose fees for requests related to initial listing on Nasdaq or requests for an exception from NASD Rule 4350(i)(2). The Nasdaq Board of Directors will also have the discretion to defer or waive all or any part of the written interpretation fee. Nasdaq has proposed to make the pilot program effective on the latter of October 1, 2003 or the date of Commission approval.

The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association. Specifically, the Commission finds that the proposal is consistent with Section 15A(b)(5) of the Act, which requires, among other things, that the rules of a national securities association provide for the equitable allocation of reasonable dues, fees, and other charges among members, issuers and other persons. The Commission believes that the written interpretation fee is reasonably related to the purpose of covering the costs of providing written interpretations and is fairly allocated among issuers. The Commission also notes that the fee is being implemented on a six-month pilot basis and that Nasdaq will evaluate its impact on issuers at the end of the pilot period and report to the Commission its findings.

Finally, the rule proposal provides the Nasdaq Board of Directors or its designee with the discretion to defer or waive all or any part of the written interpretation fee in order to address exceptional situations where the payment of a fee for an interpretation letter would be inequitable under the circumstances (e.g., in cases of economic hardship). The Commission notes that such discretion may not be used in generally applicable or frequently-replicated situations.

It is therefore ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (File No. SR-NASD-2003-105) be, and it hereby is, approved, as a six-month pilot, through March 31, 2004.