April 2, 2004
John M. Schaible
Dear Mr. Schaible:
In your letter dated November 24, 2003, you represent that OnTrade is registered with the Securities and Exchange Commission as a broker-dealer and intends to operate the NexTrade ECN. You also represent that OnTrade is entirely owned by the same parent company, NexTrade Holdings, Inc., that entirely owns and operates the NexTrade ECN. You also represent that OnTrade intends to operate the NexTrade ECN in exactly the same fashion as NexTrade, as an ECN in Nasdaq securities pursuant to the rules of one or more national securities exchanges or national securities associations (collectively, "SROs"). Therefore, you request that the Division of Market Regulation ("Division") advise OnTrade that:
You also request that the Division represent that, upon compliance with the ECN Display Alternative, the Division would not recommend that the Securities and Exchange Commission ("Commission") take enforcement action against any OTC market maker or exchange market maker as defined in the Order Execution Rules, for entry of orders into the System without modifying their public quotations in compliance with the ECN Amendment.
In your letter, you represent that:
On the basis of the representations contained in your letter, the Division confirms that OnTrade is an ECN as defined in the Order Execution Rules. The Division also preliminarily believes that OnTrade will be in compliance with the requirements applicable to the ECN Display Alternative set forth in the ECN Amendment with respect to Nasdaq securities for which a linkage between OnTrade and the SRO is operational. Accordingly, the Division will not recommend that the Commission take enforcement action against any OTC market maker or exchange market maker as defined in the Order Execution Rules, if it enters orders into OnTrade without modifying its public quotations in compliance with the Order Execution Rules.
The Division conditions its position on: (1) the continuing accuracy of the representations OnTrade has made; (2) compliance by OnTrade with all applicable rules of the Commission and all applicable SRO rules, including, but not limited to, any requirements applicable to ECNs;2 and (3) OnTrade providing response times for orders entered into OnTrade through access to the SRO that are no slower than the response time OnTrade offers to subscribers who enter orders directly into OnTrade, and in any event not more than a few seconds.
The Division notes that compliance with the ECN Amendment depends in many respects on the practical effect of the operational conditions established by OnTrade and the manner of the operation of the linkage between OnTrade and the SRO. Therefore, the Division is limiting its assurances regarding compliance with the ECN Amendment and the ECN Display Alternative and the Division's no-action relief to the period ending January 6, 2005. Further, the Division will consider extending, modifying, or revoking its temporary no-action position prior to January 6, 2005, based on its continuing experience with OnTrade's compliance with the terms of this no-action letter and the operation of the ECN Display Alternative.
The Division further conditions its position on OnTrade providing brokers access via either an SRO or the telephone for a charge of no more than the fee OnTrade charges a substantial proportion of its existing broker-dealer subscribers, and in any event, no more that $0.009 per share, plus any fees charged to OnTrade by an SRO for such trades and plus any applicable transaction fee payable pursuant to Section 31 of the Exchange Act.
This no-action position regards enforcement action under Section 11A of the Exchange Act only, and does not express any legal conclusions regarding the applicability of Section 11A of the Exchange Act or other statutory or regulatory provisions of the federal securities laws. This position is based solely on the representations you have made and is strictly limited to the operation of OnTrade as described in your letter. Any different facts or conditions, including but not limited to, modifications or revisions to, or expansion of services provided by, OnTrade, may require a different response. In addition, the Division may request additional representations from you regarding the operation of OnTrade. This position is subject to changes in current law, regulation, and interpretations; any change may require the Division to reevaluate and withdraw or modify this position.
Robert L.D. Colby
|Home | Previous Page||