[Federal Register: December 22, 2003 (Volume 68, Number 245)]
[Notices]
[Page 71207-71209]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22de03-99]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48926; File No. SR-NASD-2003-182]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the National Association of Securities Dealers, Inc. Relating
to Proposed Amendments to ``TRACE-Eligible Security'' and an Exemption
to Trade Reporting
December 15, 2003.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 5, 2003, the National Association of Securities Dealers,
Inc. (``NASD'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by NASD. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD is proposing to: (1) Amend Rule 6210(a) to clarify certain
terms used in the definition, ``TRACE-eligible security''; (2) amend
NASD Rule 6230(e)(2) to expand the trade reporting exemption to
qualifying transactions in any TRACE-eligible security that is listed
and quoted on the Nasdaq Stock Market, Inc. (``Nasdaq''); and (3) make
conforming amendments to the defined term, ``reportable TRACE
transaction,'' in Rule 6210(c). Rules 6210 and 6230 are part of the
Trade Reporting and Compliance Engine (``TRACE'') rules. Below is the
text of the proposed rule change. Proposed new language is in italics;
proposed deletions are in brackets.
* * * * *
6200. Trade Reporting and Compliance Engine (TRACE)
6210. Definitions
The terms used in this Rule 6200 Series shall have the same meaning
as those defined in NASD's By-Laws and Rules unless otherwise
specified.
(a) The term ``TRACE-eligible security'' shall mean all United
States dollar denominated debt securities that are depository eligible
securities under Rule 11310(d); Investment Grade or Non-Investment
Grade; issued by United States and/or foreign private issuers
[corporations]; and: (1) registered under the Securities Act of 1933
[with the Securities and Exchange Commission] or (2) issued pursuant to
Section 4(2) of the Securities Act of 1933 and purchased and sold
pursuant to Rule 144A of the Securities Act of 1933. The term ``TRACE-
eligible security'' excludes debt issued by government-sponsored
entities, mortgage- or asset-backed securities, collaterallized
mortgage obligations, and money market instruments. For purposes of the
Rule 6200 Series, the term ``money market instrument'' means a debt
security that at issuance has a maturity of one year or less.
(b) No Change.
(c) The term ``reportable TRACE transaction'' shall mean any
secondary market transaction in a TRACE-eligible security except
transactions in TRACE-eligible securities that are listed on a national
securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, when such transactions are executed on, and
reported to the exchange and the transaction information is
disseminated publicly, or transactions in [convertible debt] TRACE-
eligible securities that are
[[Page 71208]]
listed and quoted on the Nasdaq Stock Market, Inc. (Nasdaq), when such
transactions are reported to Nasdaq and the transaction information is
disseminated publicly.
(d) through (i) No Change.
* * * * *
6230. Transaction Reporting
(a) through (d) No Change.
(e) Transactions [Not Required To Be Reported] Exempt From
Reporting.
The following types of transactions shall not be reported:
(1) Transactions that are part of a primary distribution by an
issuer.[;]
(2) Transactions in TRACE-eligible securities that are listed on a
national securities exchange, when such transactions are executed on
and reported to the exchange and the transaction information is
disseminated publicly, and transactions in [convertible debt] TRACE-
eligible securities that are listed and quoted on Nasdaq, when such
transactions are reported to Nasdaq and the transaction information is
disseminated publicly.[; and]
(3) No Change.
(f) No Change.
* * * * *
I. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASD included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NASD has prepared summaries, set forth in Sections A, B,
and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
``TRACE-Eligible Security.'' NASD proposes to amend Rule 6210(a) to
clarify two terms in the definition, ``TRACE-eligible security.''
First, NASD proposes to replace ``registered with the Securities and
Exchange Commission'' in Rule 6210(a) with ``registered under the
Securities Act of 1933'' to clarify the intended scope of that term.
Second, NASD proposes to clarify that TRACE-eligible securities
include the debt securities of all U.S. and foreign private issuers
generally, by substituting the word ``issuers'' for ``corporations.''
Although most issuers of securities are organized as corporations, this
amendment makes clear that the debt securities of issuers that use
another form of business organization are TRACE-eligible securities,
provided that all the other conditions set forth in Rule 6210(a) are
met.
Trade Reporting Exemption for Nasdaq-Listed Debt Securities. NASD
has determined that the exemption from trade reporting in Rule
6230(e)(2), relating to debt securities listed and quoted on Nasdaq, is
inappropriately narrow. The proposed amendment to Rule 6230(e)(2) will
clarify and expand the exemption for certain transactions in TRACE-
eligible debt securities that are listed on Nasdaq. NASD is also
proposing conforming changes to Rule 6210(c).
Currently, Rule 6230(e)(2) provides, in relevant part, that a
transaction in a TRACE-eligible security is exempt from reporting if
the transaction is in a convertible debt security that is listed and
quoted on Nasdaq, the transaction is reported to Nasdaq, and the
transaction information is disseminated publicly. The proposed
amendment to Rule 6230(e)(2) will exempt a member from reporting to
TRACE a transaction in any TRACE-eligible security that is listed and
quoted on Nasdaq, rather than only convertible debt securities,
provided that the other two requirements for the exemption are also
present (i.e., the transaction is reported to Nasdaq and the
transaction information is disseminated publicly).
The purpose of the provision is to exempt from the TRACE reporting
requirements a transaction in a TRACE-eligible security if the
transaction in the Nasdaq-listed and -quoted security is already
subject to regulatory reporting, and the information reported is being
made available to the public through dissemination.\3\ At the time that
the provision relating to Nasdaq was adopted, the provision was limited
to Nasdaq-listed and -quoted convertible debt securities because it was
believed that these were the only debt securities at issue. As the
market in equity-linked debt securities has developed, NASD believes
that the language of the exemption should be broader to clarify that
the same types of transactions in these and similar securities that may
be listed and quoted on Nasdaq should also be exempt from reporting.
NASD also proposes to make conforming changes to the defined term,
``reportable TRACE transaction,'' in Rule 6210(c).
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\3\ Rule 6230(e)(2) also includes an exemption from reporting
for transactions in TRACE-eligible securities that are listed on a
national securities exchange, when the transactions are executed on
and reported to the exchange, and transaction information is
disseminated publicly.
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2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\4\ which requires, among
other things, that NASD's rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. NASD believes that the proposed rule change, if
approved, will provide NASD, as the self-regulatory organization
designated to regulate the over-the-counter markets, with appropriate
capabilities to regulate and provide surveillance of the debt
securities markets to prevent fraudulent and manipulative acts and
practices, for the protection of investors and in the public interest.
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\4\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASD does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. by order approve such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the
[[Page 71209]]
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609. Comments may also be submitted
electronically at the following e-mail address: rule-comments@sec.gov.
All comment letters should refer to File No. SR-NASD-2003-182. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review comments more efficiently,
comments should be sent in hardcopy or by e-mail but not by both
methods. Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room. Copies of such
filing will also be available for inspection and copying at the
principal office of NASD. All submissions should refer to file number
SR-NASD-2003-182 and should be submitted by January 12, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
\5\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31451 Filed 12-19-03; 8:45 am]
BILLING CODE 8010-01-P