January 6, 2005

Mr. John M. Byrne
Bloomberg LP
499 Park Avenue
New York, New York 10022

Re: Tradebook System

Dear Mr. Byrne:

This letter extends the temporary no-action position originally taken by the Division of Market Regulation ("Division") on January 17, 1997 until October 6, 2005. This letter also extends the no-action position taken by the Division on January 22, 2004 relating to Nasdaq and exchange-listed securities for which a linkage between Bloomberg Tradebook ("Tradebook" or "System") and a self-regulatory organization ("SRO") is operational. The January 17th and January 22nd letters confirmed that Tradebook is an "electronic communications network" ("ECN") as defined in the amendments to the Quote Rule and the Limit Order Display Rule (cumulatively, "Order Execution Rules") and would be in compliance with the requirements applicable to the ECN Display Alternative set forth in the ECN Amendment with respect to Nasdaq and exchange listed securities for which a linkage between Tradebook and the SRO is operational. In the January 17th and January 22nd letters, the Division took the position that it would not recommend the Commission take enforcement action against market makers or exchange specialists who are participants in the System, if those participants enter orders into the System without modifying their public quotations in compliance with the ECN Amendment. These no-action positions were temporarily extended most recently in a letter dated April 6, 2004.

The Division continues to condition its position on compliance with the terms expressed in the January 17th and January 22nd letters. These terms include, but are not limited to, compliance with the requirement that the System respond to orders entered into the System through access to the SRO no slower than the System responds to orders entered directly into the System, and in any event in no more than a few seconds.

The Division further conditions its position upon your representation that the System has sufficient capacity to handle the volume of trading reasonably anticipated in its System. Such capacity should be ensured through periodic review and testing to (1) ensure future capacity, (2) identify potential weaknesses, and (3) reduce the risks of system failures and threats to system integrity. The Division may request records from Tradebook regarding such reviews and tests.

The Division further conditions its position on the System providing brokers access via either an SRO or the telephone for a charge of no more than the fee Tradebook charges a substantial proportion of its active broker-dealer subscribers, and in any event, no more than $0.009 per share,¹ plus any fee charged to Tradebook by an SRO for trades. In addition, the Division may request additional representations from you regarding the operation of the System. Further, the Division will consider extending, modifying, or revoking its temporary no-action position prior to October 6, 2005, based on its continuing experience with Tradebook's compliance with the terms of this no-action letter and the operation of the ECN Display Alternative.

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 no-action position is based solely on the representations you have made. Any different facts or conditions might require a different response. 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.

Endnotes

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¹ The Division notes that the Commission has proposed, in Regulation NMS, to limit fees that any trading center could charge for accessing its protected quotations to no more than $0.003 per share. See Securities Exchange Act Release No. 50870 (December 16, 2004), 69 FR 77424 (December 16, 2004). Depending on what action the Commission takes with respect to Regulation NMS, the Division may determine to modify or withdraw this no-action position. This no-action position in no way prejudges what action the Commission may take with respect to any part of the Regulation NMS proposal.

http://www.sec.gov/divisions/marketreg/mr-noaction/tradebook010605.htm