June 28, 2006
Mr. John M. Byrne
Dear Mr. Byrne:
In your letter dated June 28, 2006, you requested that the Division of Market Regulation ("Division") of the Securities and Exchange Commission ("Commission") reaffirm its view that the Bloomberg Tradebook System ("System"), owned and operated by Bloomberg Tradebook LLC ("Bloomberg Tradebook"), a registered broker-dealer, is an electronic communications network ("ECN") as defined in Regulation NMS1 under the Securities Exchange Act of 1934 ("Exchange Act") and would be in compliance with the requirements applicable to the ECN Display Alternative, as described in paragraph (b)(5)(ii) of Rule 602 of Regulation NMS ("Quote Rule"),2 with respect to NMS stocks3 for which a linkage between the System and a self-regulatory organization ("SRO") is operational. The Division has previously taken that view in a number of no-action letters, most recently in November 2005.4
The Division hereby grants your request. Accordingly, the Division will not recommend that the Commission take enforcement action against OTC market makers5 or exchange market makers6 who are participants in the System, if those market makers enter orders into the System without modifying their public quotations, in compliance with the Quote Rule and Rule 604 of Regulation NMS ("Limit Order Display Rule"),7 as applicable. In taking this position, the Division has relied on various representations you made regarding the operation of the System, specifically that:
The Division's no-action position is conditioned on Bloomberg Tradebook maintaining active connectivity with one or more SRO trading facilities or SRO display-only facilities. In the event that the System loses connectivity with an SRO trading facility or SRO display-only facility, Bloomberg Tradebook, with respect to that facility, would not be in compliance with the ECN Display Alternative and the no-action relief described herein would not be available. Bloomberg Tradebook represents that it continuously and systematically monitors its connections to each SRO trading facility and/or SRO display-only facility with which it has established a linkage.
The Division further conditions its position on the continuing accuracy of these representations and compliance by Bloomberg Tradebook with all applicable Commission and SRO rules, including any additional requirements applicable to ECNs. Any different facts or conditions including, but not limited to, modifications or revisions to, or expansion of service provided by, Bloomberg Tradebook may require a different response. The Division may request additional representations from you regarding the operation of the System. This no-action position is subject to changes in current law, regulation, and interpretations; any such change may require the Division to reevaluate and withdraw or modify this position. This no-action position concerns enforcement action under Section 11A of the Exchange Act only,12 and does not express any legal conclusions regarding the applicability of Section 11A or other statutory or regulatory provisions of the federal securities laws.
Robert L.D. Colby
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