SEC Division of Trading and Markets no-action letter: National Stock Exchange

June 28, 2005

VIA FACSIMILE AND U.S. MAIL

James C. Yong, Esq. Senior Vice President, Regulation, and General Counsel National Stock Exchange One Financial Place 440 South LaSalle Street Suite 2600 Chicago, IL 60605

Re: Display of Rounded Prices in Public Quotes

Dear Mr. Yong:

In your letter dated June 28, 2005, on behalf of the National Stock Exchange (“NSX” or “Exchange”), formerly The Cincinnati Stock Exchange (“CSE”), you requested that the Commission extend the exemption from Rules 11Ac1-1, 11Ac1-2, and 11Ac1-4 under the Securities Exchange Act of 1934 initially granted by the Commission in 2002. 1 In the Initial Exemption Letter, the Commission granted a conditional temporary exemption to the CSE, CSE members, and vendors that disseminate CSE quote information to permit them to display and disseminate their quotes for Nasdaq National Market (“NNM”) and SmallCap securities in rounded, penny increments without a rounding identifier. In a subsequent extension of this exemption, the Commission expanded the exemption to include all listed securities traded on the CSE in addition to NNM and SmallCap securities. 2 The Commission granted extensions of the exemption on November 27, 2002, 3 May 29, 2003, 4 December 1, 2003, 5 and June 30, 2004. 6 You have requested a further temporary extension of this exemption.

Based on the representations in your requests for relief and contingent upon NSX’s compliance with the conditions stated in the Initial Exemption Letter and the Amended Exemption Letter, the Commission finds that the requested exemption is consistent with the public interest, the protection of investors, and the removal of impediments to, and perfection of the mechanism of, a national market system. The Commission hereby grants an extension of the exemption until August 29, 2005, the effective date for Rule 612 of Regulation NMS. 7 This exemption is expressly contingent upon NSX’s continuing compliance with the conditions detailed in the Initial Exemption Letter and Amended Exemption Letter. In light of the implementation of Rule 612, the Commission does not intend to grant additional extensions of this exemption.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority,

Annette L. Nazareth Director

See Letter from Robert L.D. Colby, Deputy Director, Division of Market Regulation (“Division”), Commission, to Jeffrey D. Brown, General Counsel, CSE, dated July 26, 2002 (“Initial Exemption Letter”).

See Letter from Robert L.D. Colby, Deputy Director, Division, Commission, to Jeffrey T. Brown, Senior Vice President & General Counsel, CSE, dated September 25, 2002 (“Amended Exemption Letter”).

See Letter from Alden S. Adkins, Associate Director, Division, Commission, to Jeffrey T. Brown, Senior Vice President, Secretary & General Counsel, CSE, dated November 27, 2002.

See Letter from Robert L.D. Colby, Deputy Director, Division, Commission, to Jeffrey T. Brown, Senior Vice President, Secretary & General Counsel, CSE, dated May 29, 2003.

See Letter from Robert L.D. Colby, Deputy Director, Division, Commission, to Jennifer M. Lamie, Assistant General Counsel & Secretary, NSX, dated December 1, 2003.

See Letter from David S. Shillman, Associate Director, Division, Commission, to James C. Yong, Senior Vice President, Regulation, and General Counsel, NSX, dated June 30, 2004 ("June 2004 Letter").

In the June 2004 Letter, the Commission stated that the Commission may modify, withdraw, or extend the exemption, depending upon the action taken by the Commission on proposed Regulation NMS. On April 6, 2005, the Commission voted to adopt Regulation NMS. Rule 612 of Regulation NMS as adopted would, among other things, prohibit market participants from displaying, ranking, or accepting quotations in NMS stocks that are priced in an increment of less than $0.01 per share, unless the price of the quotation is less than $1.00. If the price of the quotation is less than $1.00, the minimum increment is $0.0001. See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR ____ (not yet published).

Incoming Letter:

June 28, 2005

The Incoming Letter is in Acrobat format.

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James C. Yonq
Senior Vice President
Requlation and General Counsel yonqj@nsx.com
June 28,2005
VIA FEDERAL EXPRESS
Ms. Annette Nazareth
Director, Division of Market Regulation
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Display of Rounded Prices in Public Quotes Sixth Extension Request Dear Ms. Nazareth:
On behalf of National Stock ~xchange'~ (the "Exchange"), I am writing to request this sixth extension of the Exchange's request for an exemption from Rules 1 I Acl-1, 1 1Acl-2, and 11Acl -4 promulgated under the Securities Exchange Act of 1934, as amended. As originally filed, our November 27, 2001 exemption request letter kd-requested permission for Exchange members to display their quotes for NasdaqMational Market ("NasdaqMM") securities in penny increments while trading in subpenny increments. The Securities and Exchange Commission ('-Commission") approved this exemption request by letter dated July 26, 2002 on a temporary basis, with such approval expiring on September 30, 2002. By a letter dated September 18, 2002, the Exchange sought to amend the exemption request so that it would extend to all listed securities traded on the Exchange, not just NasdaqMM securities. At that time, the Exchange also asked that the Commission extend the period of the exemption through December 1, 2002. The Commission granted these requests on September . 25, 2002. The Exchange has thereafter sought to extend the exemption request, as modified by the Commission's September 2002 approval, through May 31,2003, December 1,2003, June 30, 2004 and again through June 30, 2005. The Commission granted these requests on November 27,2002, May 29,2003, December 1,2003 and June 30,2004, respectively. The Exchange is herein seeking to again extend the exemption request to expire at the end of the day before the Commission's Rule 612, the "Sub-Penny Rule," under Regulation NMS goes into effect.' No other changes are being requested at this time. We respectfully '-See Securities Exchange Act Release No. 5 1808 (June 9,2005) One F~nanc~al Place Phone 312.786.8893 440 South LaSalle Street Suite 2600 Fax 312.939.7239 Chicaqo Illinois 60605 www.nsx.com

Ms. Annette Nazareth
June 28,2005 request that the Commission act upon this request expeditiously so that the exemption may continue uninterrupted.
Very truly yours,
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cc. Michael Gaw (SEC)
Raymond Lombardo (SEC) /
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