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U.S. Securities and Exchange Commission

Commission Notice:
Nasdaq Stock Market, Inc., Files Application for Registration as a National Securities Exchange


(Release No. 34-44396; File No. 10-131)

June 7, 2001

The Nasdaq Stock Market, Inc.; Notice of Filing of Application for Registration as a National Securities Exchange Under Section 6 of the Securities Exchange Act of 1934

The Nasdaq Stock Market, Inc. ("Nasdaq") completed its application for registration as a national securities exchange ("Form 1") under Section 61 of the Securities Exchange Act of 1934 (the "Exchange Act") and submitted it to the Securities and Exchange Commission ("SEC" or "Commission") on March 15, 2001.2 The Commission is publishing this notice to solicit comments on Nasdaq's Form 1.

I. Background

Until recently, Nasdaq was a wholly-owned subsidiary of the National Association of Securities Dealers, Inc. ("NASD"). On April 14, 2000, NASD members voted in favor of a restructuring plan that broadens the ownership of Nasdaq through a two-phase, private placement of common stock and warrants to include not only NASD members, but also Nasdaq issuers, institutional investors and strategic partners. In the first phase of the private placement, which was completed in June 2000, the NASD sold shares and issued warrants overlaying shares of Nasdaq it owned, and Nasdaq also issued and sold additional shares. As a result, the NASD's ownership interest in Nasdaq was reduced from 100% to 60%. The second phase of the private placement was completed on January 18, 2001, and as a result the NASD's ownership interest in Nasdaq was further reduced to 40%.3

Nasdaq currently is operated by the NASD pursuant to a Plan of Allocation and Delegation of Functions by the NASD to Subsidiaries as approved by the Commission.4 Until approval of Nasdaq's exchange registration, the shares of common stock underlying unexercised and unexpired warrants, as well as the shares of common stock purchased through the valid exercise of warrants, will be voted by a trustee at the direction of the NASD. Thus, even though the NASD has divested itself of its ownership interest and currently does not own a controlling interest in Nasdaq, the NASD nonetheless exercises effective control over Nasdaq through voting until the Commission approves Nasdaq's exchange registration.

II. Nasdaq's Exchange Registration

Nasdaq currently is exempt from the definition of "exchange" under Rule 3a1-1 because it is operated by the NASD.5 Before the NASD may relinquish control, Nasdaq must register as a national securities exchange.6 Accordingly, Nasdaq has filed a complete Form 1, including all of the required exhibits, to register as a national securities exchange.

The Form 1 provides detailed information about Nasdaq and how it proposes to satisfy the requirements of the Exchange Act. The Commission shall grant such registration if it finds that the requirements of the Exchange Act and the rules and regulations thereunder with respect to Nasdaq are satisfied.7 There are a number of implications to Nasdaq's separation from the NASD and application to register and operate as an exchange. For example, Nasdaq will have to demonstrate that it has the capacity to comply, and enforce compliance by its members, with the Exchange Act and its own rules.8 In addition, while members of a national securities association are not subject to Section 10(a)9 when trading Nasdaq stocks, if the Commission approves Nasdaq's registration as an exchange, Section 10(a) will apply to such trading. Moreover, while Nasdaq members are not subject to Section 11(a)10 of the Exchange Act for their Nasdaq transactions, they would be subject to Section 11(a) if Nasdaq becomes an exchange. Furthermore, while the Form 1 contemplates that Nasdaq will be an exchange trading Nasdaq National Market securities and Nasdaq SmallCap securities, the future operation of the Over-the-Counter Bulletin Board must be addressed. Before Nasdaq can register as a national securities exchange, it must be able to satisfy its obligations under Section 11A11 of the Act. Finally, Nasdaq's exchange registration has implications for the NASD which, as a national securities association, will continue to be required to collect bids, offers and quotation sizes for those entities seeking to trade listed securities, including Nasdaq securities, otherwise than on a national securities exchange.12 The Commission notes that the NASD's quotation and transaction reporting facility must be operational upon Nasdaq's exchange registration.

III. Solicitation of Comments

A complete copy of Nasdaq's Form 1 is available in the Commission's Public Reference Room, File No. 10-131. Portions of Nasdaq's Form 1, including Nasdaq's rules, also are available on the Commission's website at http://www.sec.gov/rules/other.shtml. Interested persons should submit three copies of their written data, views and opinions on Nasdaq's Form 1 to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609. Comments also may be submitted electronically at the following E-mail address: rule-comments@sec.gov. Comments must be received on or before [insert date 45 days after publication in the Federal Register]. All comment letters should refer to File No. 10-131; this file number should be included on the subject line if comments are submitted using E-mail. The Commission requests that commenters focus on issues raised in Nasdaq's Form 1, File No. 10-131, when submitting comments in response to this notice. Commenters wishing to address another specific rule filing by the NASD pending with the Commission should direct their comments to that specific rule proposal. Copies of all submissions, amendments, and all written statements will be available for public inspection and copying at the Commission's Public Reference Room. Electronically submitted comment letters will be posted on the Commission's Internet website (http://www.sec.gov).

For questions regarding this release, contact Rebekah Liu, Special Counsel, at (202) 942-0133; Geoffrey Pemble, Attorney, at (202) 942-0757, Division of Market Regulation, Securities and Exchange Commission, 450 Fifth Street, Washington, D.C. 20549-1001.

By the Commission.

  Jonathan G. Katz



1 15 U.S.C. 78(f).
2 See Letter to Annette L. Nazareth, Director, Division of Market Regulation ("Division"), Commission, from Edward S. Knight, Executive Vice President and General Counsel, Nasdaq, dated November 9, 2000. Exhibits A and C to Nasdaq's application were incomplete, and therefore on March 15, 2001, Nasdaq submitted to the Commission revised Exhibits A and C to address the deficiencies. As a result, Nasdaq's Form 1 was completed and officially filed with the Commission on March 15, 2001.
3 For both phases of the private placement, the NASD's percentage ownership of Nasdaq assumes that all warrants sold are fully exercised. Recently, Nasdaq also announced an agreement to sell subordinated debentures convertible into Nasdaq common stock to a private equity firm. If fully converted, this private equity firm would own approximately 9.8% of Nasdaq common stock. The Division currently is considering changes to Nasdaq's Certificate of Incorporation that would be necessary to consummate the sale of these debentures.
4 Securities Exchange Act Release No. 37107 (April 11, 1996), 61 FR 16948 (April 18, 1996).
5 Pursuant to Rule 3a1-1, an organization, association, or group of persons shall be exempt from the definition of "exchange" if it is operated by a national securities association. Unless another exemption from the definition of "exchange" applies, such organization, association, or group of persons that otherwise meets the definition of an "exchange" must register as such with the Commission. 17 CFR 240.3a1-1.
6 The voting trust will automatically expire and the NASD will no longer control or operate Nasdaq upon Nasdaq's registration as an exchange.
7 Section 19(a) of the Exchange Act, 15 U.S.C. 78(s)(a).
8 15 U.S.C. 78f(b)(1).
9 15 U.S.C. 78j(a).
10 15 U.S.C. 78k(a).
11 15 U.S.C. 78k-1.
12 17 CFR 240.11Ac1-1(b)1(ii).

Form 1 Application and Exhibits

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Nasdaq Application for Registration

Form 1 – The Application

Exhibit A   A copy of the constitution, articles of incorporation or association with all subsequent amendments, and of existing by-laws or corresponding rules or instruments, whatever the name, of the applicant.

Attached please find the requested information under the following tabs:

Tab 1:Articles of Incorporation
Tab 2:By-Laws
Tab 3:Rule 0100 Series
Tab 4:Rule 1000 Series
Tab 5:Rule 2000 Series
Tab 6:Rule 3000 Series
Tab 7:Rule 4000 Series
Tab 8:Rule 5000 Series
Tab 9:Rule 6000 Series
Tab 10:Rule 7000 Series
Tab 11:Rule 8000 Series
Tab 12:Rule 9000 Series
Tab 13:Rule 10000 Series
Tab 14:Rule 11000 Series

Exhibit B   A copy of all written rulings, settled practices having the effect of rules, and interpretations of the Governing Board or other committee of the applicant in respect of any provisions of the constitution, by-laws, rules, or trading practices of the applicant which are not included in Exhibit A.

All requested items have been incorporated into Exhibit A.

Exhibit C   For each subsidiary or affiliate of the applicant, and for any entity with whom the applicant has a contractual or other agreement relating to the operation of an electronic trading system to be used to effect transactions on the exchange ("System"), provide the following information:

  1. Name and address of organization.
  2. Form of organization (e.g., association, corporation, partnership, etc.).
  3. Name of state and statute citation under which organized. Date of incorporation in present form.
  4. Brief description of nature and extent of affiliation.
  5. Brief description of business or functions. Description should include responsibilities with respect to operation of the System and/or execution, reporting, clearance, or settlement of transactions in connection with operation of the System.
  6. A copy of the constitution.
  7. A copy of the articles of incorporation or association including all amendments.
  8. A copy of existing by-laws or corresponding rules or instruments.
  9. The name and title of the present officers, governors, members of all standing committees, or persons performing similar functions.
  10. An indication of whether such business or organization ceased to be associated with the applicant during the previous year, and a brief statement of the reasons for termination of the association.

Attached, please find the requested information for the following subsidiaries and affiliates of the Nasdaq Stock Market, Inc.:

Tab 1:American Stock Exchange, LLC
Tab 2:American Stock Exchange Clearing LLC
Tab 3:American Stock Exchange Realty Associates LLC
Tab 4:Amex Commodities LLC
Tab 5:Depository Trust and Clearing Corporation
Tab 6:e-xChange Advantage Corporation
Tab 7:IndigoMarkets, Ltd.
Tab 8:National Association of Securities Dealers, Inc.
Tab 9:NASD Dispute Resolution, Inc.
Tab 10:NASD Institute for Professional Development
Tab 11:NASD Insurance Agency, LLC
Tab 12:NASD Holding Company, Inc.
Tab 13:NASD Regulation, Inc.
Tab 14:Nasdaq/BIOS R&D Joint Venture
Tab 15:Nasdaq Europe Planning Company, Ltd.
Tab 16:Nasdaq Global Holdings, Inc.*
Tab 17:Nasdaq Global Technologies, Inc.
Tab 18:Nasdaq International, Ltd.
Tab 19:Nasdaq International Marketing Initiative, Inc.
Tab 20:Nasdaq-Amex Investment Products Services, Inc.
Tab 21:Nasdaq Japan Planning Company, Inc.
Tab 22:Nasdaq LTDA
Tab 23:The Nasdaq Stock Market Educational Foundation, Inc.
Tab 24:Nasdaq Tools, Inc.
Tab 25:National Clearing Corporation
Tab 26:OPEN GETS, S.A.
Tab 27:Options Clearing Corporation
Tab 28:PDR Services LLC
Tab 29:Quadsan Enterprises, Inc.
Tab 30:Securities Dealers Insurance Company, Ltd.
Tab 31:Securities Dealers Risk Purchasing Group, Inc.
Tab 32:Securities Industry Automation Corporation

Also attached, at Tabs 33 and 34 is information regarding OptiMark Holdings. Inc. and Worldcom, Inc. The Nasdaq Stock Market has a contractual agreement with OptiMark and Worldcom relating to the operation of an electronic trading system to be used to effect transactions on the exchange.

Exhibit D   For each subsidiary or affiliate of the exchange, provide unconsolidated financial statements for the latest fiscal year. Such financial statements shall consist, at a minimum, of a balance sheet and an income statement with such footnotes and other disclosures as are necessary to avoid rendering the financial statements misleading. If any affiliate or subsidiary is required by another Commission rule to submit annual financial statements, a statement to that effect, with a citation to the other Commission rule, may be provided in lieu of the financial statements required here.

Attached, please find financial statements, with footnotes where necessary to avoid rendering the financial statements misleading, for the Nasdaq Stock Market, Inc. and the following subsidiaries and affiliates:

Tab 1:The Nasdaq Stock Market, Inc.
Tab 2:American Stock Exchange, LLC
Tab 3:American Stock Exchange Clearing LLC
Tab 3:American Stock Exchange Realty Associates LLC
Tab 3:Amex Commodities LLC
Tab 4:Depository Trust and Clearing Corporation
Tab 5:e-xChange Advantage Corporation
Tab 6:IndigoMarkets, Ltd.
Tab 7:National Association of Securities Dealers, Inc.
Tab 8:NASD Dispute Resolution, Inc.
Tab 9:NASD Institute for Professional Development
Tab 10:NASD Insurance Agency, LLC
Tab 11:NASD Regulation, Inc.
Tab 12:The Nasdaq Amex Market Group
Tab 13:Nasdaq/BIOS R&D Joint Venture
Tab 14:Nasdaq Europe Planning Company, Ltd.
Tab 15:Nasdaq Global Holdings, Inc.*
Tab 16:Nasdaq International, Ltd.
Tab 17:Nasdaq International Marketing Initiative, Inc.
Tab 18:Nasdaq Investment Products Services, Inc.
Tab 19:Nasdaq Japan Planning K.K.
Tab 20:Nasdaq LTDA
Tab 21:The Nasdaq Stock Market Educational Foundation, Inc.
Tab 22:Nasdaq Tools, Inc.
Tab 23:National Clearing Corporation
Tab 24:OPEN GETS, S.A.
Tab 25:Options Clearing Corporation
Tab 26:PDR Services LLC
Tab 27:Quadsan Enterprises, Inc.
Tab 28:Securities Dealers Insurance Company, Ltd.
Tab 29:Securities Dealers Risk Purchasing Group, Inc.
Tab 30:Securities Industry Automation Corporation

*Nasdaq Global Technology, Ltd., a wholly-owned subsidiary of Nasdaq Global Holdings, Inc., was incorporated to hold the intellectual property rights for the trading platforms to be developed for use by Nasdaq Japan and Nasdaq Europe. As these platforms are yet to be developed, there is currently no financial information available for this entity.

Exhibit E   Describe the manner of operation of the System. This description should include the following:

  1. The means of access to the System.
  2. Procedures governing entry and display of quotations and orders in the System.
  3. Procedures governing the execution, reporting, clearance and settlement of transactions in connection with the System.
  4. Proposed fees.
  5. Procedures for ensuring compliance with System usage guidelines.
  6. The hours of operation of the System, and the date on which applicant intends to commence operation of the System.
  7. Attach a copy of the users' manual.
  8. If applicant proposes to hold funds or securities on a regular basis, describe the controls that will be implemented to ensure safety of those funds or securities.

Tab 1:Systems Description
Tab 2:Proposed Fees
Tab 3: ACES Pass-thru User Guide
Tab 4:ACT User Guide
Tab 5: CAES/ITS User Guide
Tab 6: CTCI Subscriber Requirement
Tab 7: Nasdaq Workstation II User Guide
Tab 8: Optimark User Guide
Tab 9:SelectNet User Guide
Tab 10:SOES User Guide

Exhibit F   A complete set of all forms pertaining to:

  1. Application for membership, participation, or subscription to the entity.
  2. Application for approval as a person associated with a member, participant, or subscriber of the entity.
  3. Any other similar materials.

The following forms will be used.

Nasdaq Forms
Tab 1:An application form that will be used by firms that are active NASD members at the time exchange registration is granted that want to exercise the option of automatically becoming Nasdaq members and automatically registering their associated persons with Nasdaq during the initial phase-in period. This will be an interim form to be used only for this purpose.
Tab 2:An application form that will be used by firms that are NASD members or members of an SRO other than the NASD to apply for Nasdaq membership after the initial phase-in period. This will be the permanent form to be utilized for this purpose. See Rule 1013(a).

SEC and SRO Forms

Tab 3:Form BD
Tab 4:Form U-4
Tab 5:Form U-5

Exhibit G   A complete set of all forms of financial statements, reports, or questionnaires required of members, participants, subscribers, or any other users relating to financial responsibility or minimum capital requirements for such members, participants, or any other users. Provide a table of contents listing the forms included in this Exhibit G.

Other than those forms and financial statements required to be submitted with an application for Nasdaq membership (See Exhibit G), Nasdaq will not require its members to submit specific forms of financial statements, reports, or questionnaires relating to financial responsibility or minimum capital requirements.

Exhibit H   A complete set of documents comprising the applicant's listing applications, including any agreements required to be executed in connection with listing and a schedule of listing fees. If the applicant does not list securities, provide a brief description of the criteria used to determine what securities may be traded on the exchange. Provide a table of contents listing the forms included in this Exhibit H.

Tab 1:Nasdaq National Market IPO Application (1933 Act Filings)
Tab 2:Nasdaq National Market Application For Public Securities (1934 Act Filings)
Tab 3:Addendum: Nasdaq National Market Application Amendment
Tab 4:The Nasdaq SmallCap Market Application
Tab 5:Addendum: The Nasdaq SmallCap Market Application Amendment
Tab 6:Fee Structure and Financial Requirements
Tab 7:The Nasdaq Stock Market Listing of Additional Shares (LAS)
Tab 8:The Nasdaq Stock Market Notification Form for Change in the Number of Shares Outstanding and Change in Issuer Name
Tab 9:The Nasdaq Stock Market Cash Dividend/Distribution Notification Form

Exhibit I   For the latest fiscal year of the applicant, audited financial statements which are prepared in accordance with, or in the case of a foreign applicant, reconciled with, United States generally accepted accounting principles, and are covered by a report prepared by an independent public accountant. If an applicant has no consolidated subsidiaries, it shall file audited financial statements under Exhibit I alone and need not file a separate unaudited financial statement for the applicant under Exhibit D.

Attached, please find the Consolidated Financial Statements for The Nasdaq Stock Market Inc., prepared by Ernst & Young, independent financial auditors. The Consolidated Financial Statements cover the fiscal years ended December 31, 1999 and 1998, and the three years in the period ended December 31, 1999.

Exhibit J   A list of the officers, governors, members of all standing committees, or persons performing similar functions, who presently hold or have held their offices or positions during the previous year, indicating the following for each:

  1. Name.
  2. Title.
  3. Dates of commencement and termination of term of office or position.
  4. Type of business in which each is primarily engaged (e.g., floor broker, specialist, odd lot dealer, etc.).

Tab 1:Board of Directors
Tab 2:Nasdaq Officers
Tab 3:Market Operations Review Committee
Tab 4:Listing and Hearing Review Council
Tab 5:Quality of Markets Committee

Exhibit K   This Exhibit is applicable only to exchanges that have one or more owners, shareholders, or partners that are not also members of the exchange. If the exchange is a corporation, please provide a list of each shareholder that directly owns 5% or more of a class of a voting security of the applicant. If the exchange is a partnership, please provide a list of all general partners and those limited and special partners that have the right to receive upon dissolution, or have contributed, 5% or more of the partnership's capital. For each of the persons listed in the Exhibit K, please provide the following:

  1. Full legal name;
  2. Title or Status;
  3. Date title or status was acquired;
  4. Approximate ownership interest; and
  5. Whether the person has control, a term that is defined in the instructions to this Form.

  1. National Association of Securities Dealers, Inc. (NASD)
  2. Majority owner
  3. The NASD has been the sole or majority owner of the Nasdaq Stock Market, Inc., or its predecessors, since January 12, 1976.
  4. Upon completion of Phase 1 of the NASD's Private Placement, the NASD currently owns 81% of the common (voting) stock. Due to warrants issued during Phase 1 that will be exercisable at a later date, the NASD's voting rights may diminish to 60%.
  5. The NASD is a control person with regard to Nasdaq.

No other person or entity owns or controls 5% or more of the common (voting) stock.

Exhibit L   Describe the exchange's criteria for membership in the exchange. Describe conditions under which members may be subject to suspension or termination with regard to access to the exchange. Describe any procedures that will be involved in the suspension or termination of a member.

The criteria for membership in Nasdaq will be substantially the same as the criteria currently applicable to firms applying for membership in the NASD, since Nasdaq's new membership rules will essentially mirror most of the rules in the NASD's Rule 1010 eries. See Nasdaq Rule 1014(a). Nasdaq staff believes that the majority of Nasdaq members also will be members of the NASD.1 Nasdaq's rules will require a broker-dealer to be a member of at least one other self-regulatory organization ("SRO") before applying for membership in Nasdaq. However, NASD membership will be mandated for applicants that will transact business with the public.

Examinations and basic qualifications required of Nasdaq Registered Representatives and Principals will be the same as those currently required by the NASD in accordance with the activities conducted by the individual. Nasdaq member firms will be required to register individuals in the registration categories that are appropriate for their identified business practices (e.g., General Securities Principal, Equity Trader).

Nasdaq will adopt a temporary rule providing that all active NASD member firms at the time Nasdaq is approved as a securities exchange will have the option of electing to automatically become a Nasdaq member and to automatically register with Nasdaq all of their associated persons whose registrations were active at the time Nasdaq was approved as an exchange.2 Firms exercising this option will be registered as Nasdaq members under the same terms and conditions as their NASD membership. Accordingly, each firm will be able to engage in the same business and will be subject to the same restrictions as are described in its membership agreement with the NASD. In addition, all of the firm's associated persons who are registered in categories recognized by Nasdaq will become registered persons of a Nasdaq member firm. The firm's admission to Nasdaq will be contingent, however, upon execution of a simple agreement with Nasdaq at the time the option is exercised, stating that the firm will comply with the terms and conditions of its membership agreement with the NASD and Nasdaq, and submission of revised Forms BD and U-4.

Subsequent to this initial open period for active NASD firms, a Nasdaq membership process will apply to non-NASD firms that are members of another SRO, new broker-dealers, or NASD member firms that declined initial Nasdaq inclusion. This process will require these firms to apply for membership in Nasdaq and comply with the Nasdaq Rule 1010 Series. Firms that apply to become both NASD and Nasdaq members may file one full membership application with the NASD in compliance with the NASD Rule 1010 Series. However, Nasdaq will not act on the application until the firm has become an NASD member. Members of an SRO other than the NASD or NASD members that declined the initial Nasdaq inclusion that apply to become Nasdaq members must submit a complete application form, which requires fewer items than are currently required by the NASD, due to the fact that the applicant already is a member of another SRO. 3

Nasdaq has entered into an agreement with NASDR to receive and process membership applications under appropriate Nasdaq membership rules, which are substantially similar to NASD membership rules. NASDR will review the membership application, conduct the membership interview, and prepare a concise evaluation report4 that will be submitted to the Nasdaq Membership Department staff for a final Nasdaq membership decision. In reviewing all prospective Nasdaq members, NASDR will apply the standards for admission found in Nasdaq Rule 1014(a). These standards encompass, among others, the adequacy of the applicant's financial viability with respect to its intended business operations, and the suitability of its supervisory system. Nasdaq staff will then review the NASDR-provided report and any other pertinent information before making an evaluation of the firm. In certain instances, as Nasdaq determines to be appropriate, Nasdaq staff may undertake additional membership inquiries of a prospective member, potentially involving requests for additional interviews or documentation. This further evaluation may be based upon an independent review by Nasdaq staff of certain factors deemed essential to the proper operation of an equity trading firm (e.g., equity trading experience, supervisory experience, disciplinary history of firm personnel). Nasdaq will make the decision as to whether an applicant should be approved as a member of the Exchange.

Upon a grant of Nasdaq membership, non-NASD members of Nasdaq will be required to sign a Nasdaq membership agreement indicating their acceptance of any terms upon which their membership is based. Dual NASD/Nasdaq members will, in most instances, be required to sign only a Nasdaq addendum to the existing NASD membership agreement.

Appeals of staff denials of membership will be heard by the Nasdaq Review Council. Decisions of this committee will be final, but may be called for review by the Nasdaq Board. This method is consistent with the current method by which the NASD Board may call for review membership decisions made by the NASDR National Adjudicatory Council.

Nasdaq will enter into an agreement with NASDR to handle applications by Nasdaq members for a change in operations or to remove a business restriction under Nasdaq Rule 1017. NASDR will then assess the propriety of this request and provide a findings report to Nasdaq. Nasdaq will make the final decision concerning this request and, in these instances, a new membership agreement may be required.

Nasdaq also will enter into an agreement with NASDR to conduct disciplinary proceedings involving Nasdaq member firms, including suspensions and terminations, which will be conducted pursuant to the NASD/Nasdaq Code of Procedure (The Rule 9000 Series) and NASD/Nasdaq Rule 8300. Nasdaq will, however, have the additional authority (as does the NASD) under Nasdaq Rule 9510 to summarily terminate or suspend members that have been barred or suspended by another SRO, are in or approaching great financial or operational difficulty, or do not otherwise meet Nasdaq's qualification requirements.

1 Section 15(a)(8) of the Securities Exchange Act of 1934 requires all registered brokers or dealers to be members of a registered securities association (i.e., the NASD), unless the broker or dealer effects transactions in securities solely on a national securities exchange of which it is a member. Therefore, any firm that effects transactions with customers or in the OTC market must become a member of the NASD.
2 This election must be affirmatively made within 90 days of Nasdaq's exchange registration approval.
3 Minor revisions to Forms BD and U-4 will be required to add a new check box to indicate Nasdaq as a selected SRO. In the interim period until the Forms can be revised, CRD changes will be made to accomplish this goal.
4 The details of this report will be agreed upon by Nasdaq and NASDR.

Exhibit M   Provide an alphabetical list of all members, participants, subscribers or other users, including the following information:

  1. Name;
  2. Date of election to membership or acceptance as a participant, subscriber or other user;
  3. Principal business address and telephone number;
  4. If member, participant, subscriber or other user is an individual, the name of the entity with which such individual is associated and the relationship of such individual to the entity (e.g. partner, officer, director, employee, etc.);
  5. Describe the type of activities primarily engaged in by the member, participant, subscriber, or other user (e.g. floor broker, specialist, odd lot dealer, other market maker, proprietary trader, non-broker dealer, inactive or other functions). A person shall be "primarily engaged" in an activity or function for purposes of this item when that activity or function is the one in which that person is engaged for the majority of their time. When more than one type of person at an entity engages in any of the six types of activities or functions enumerated in this item, identify each type (e.g. proprietary trader, Registered Competitive Trader and Registered Competitive Market Maker) and state the number of members, participants, subscribers, or other users in each; and
  6. The class of membership, participation or subscription or other access.

Presently, to participate in Nasdaq, a broker-dealer must be a member of the NASD. Nasdaq will not be a self-regulatory organization separate from the NASD until it is registered as a national securities exchange. Therefore, Nasdaq does not currently have members.

Once Nasdaq is registered as a national securities exchange, it will file the information required by this exhibit every thirty (30) days, commencing on the date of registration as an exchange and ending on the date ninety (90) days after the date of registration.

Exhibit N   Provide a schedule for each of the following:
  1. The securities listed in the exchange, indicating for each the name of the issuer and a description of the security;
  2. The securities admitted to unlisted trading privileges, indicating for each the name of the issuer and a description of the security;
  3. The unregistered securities admitted to trading on the exchange which are exempt from registration under Section 12(a) of the Act. For each security listed, provide the name of the issuer and a description of the security, and the statutory exemption claimed (e.g. Rule 12a-6); and
  4. Other securities traded on the exchange, including for each the name of the issuer and a description of the security.

Tab 1:Securities Listed on The Nasdaq Stock Market as of September 30, 2000
Tab 2:Securities Admitted to Unlisted Trading Privileges
Tab 3:Securities Quoted on Over-the Counter Bulletin Board as of September 30, 2000



Modified: 06/12/2001