[Federal Register: February 20, 2007 (Volume 72, Number 33)]
[Notices]
[Page 7785-7787]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe07-31]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55274; File No. SR-NASD-2007-012]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change to Implement Certain Approved NASD Rule Changes Upon the
Operation of the Nasdaq Stock Market LLC for Non-Nasdaq Exchange-Listed
Securities
February 12, 2007.
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 February 9, 2007, the National Association of Securities Dealers,
Inc. (``NASD'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the NASD. The NASD
filed the proposed rules change pursuant to Section 19(b)(3)(A) of the
Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposed
rule change effective upon filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NASD has filed a proposed rule change to (1) Provide notice
that the amendments to the NASD Rule 4700 Series that were approved
pursuant to SR-NASD-2006-104 \5\ will not be implemented; (2) implement
certain amendments that were approved pursuant to SR-NASD-2006-104 upon
the operation of the Nasdaq Stock Market LLC (the ``Nasdaq Exchange'')
as a national securities exchange for non-Nasdaq exchange-listed
securities; and (3) propose additional changes that were not approved
pursuant to SR-NASD-2006-104, specifically the deletion of the Rule
4700 Series and Rule 5150. All other rule changes that were approved
pursuant to SR-NASD-2006-104, and were not implemented pursuant to SR-
NASD-2006-135,\6\ will be implemented upon the operation of NASD's
Alternative Display Facility (``ADF'') for non-Nasdaq exchange-listed
securities, as approved by the Commission on September 28, 2006.\7\ The
text of the proposed amendments is available at the NASD, from the
Commission's Public Reference Room, and on the NASD's Web site (http://www.nasd.com
).
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\5\ See Securities Exchange Act Release No. 54798 (November 21,
2006), 71 FR 69156 (November 29, 2006) (order approving SR-NASD-
2006-104).
\6\ See Securities Exchange Act Release No. 54984 (December 20,
2006), 71 FR 78245 (December 28, 2006) (notice of filing and
immediate effectiveness of SR-NASD-2006-135).
\7\ See Securities Exchange Act Release No. 54537 (September 28,
2006), 71 FR 59173 (October 6, 2006) (order approving SR-NASD-2006-
091).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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.
[[Page 7786]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On June 30, 2006, the Commission approved SR-NASD-2005-087, which,
among other things, proposed an implementation strategy for the
operation of the Nasdaq Exchange as a national securities exchange for
Nasdaq-listed securities during a transitional period and also proposed
rules for reporting trades in Nasdaq-listed securities effected
otherwise than on an exchange to the NASD/Nasdaq Trade Reporting
Facility (the ``NASD/Nasdaq TRF'').\8\ On November 21, 2006, the
Commission approved SR-NASD-2006-104, which, among other things,
proposed amendments necessary to reflect the complete separation of The
Nasdaq Stock Market Inc. (``Nasdaq'') from the NASD upon the operation
of the Nasdaq Exchange as a national securities exchange for non-Nasdaq
exchange-listed securities and also proposed to expand the scope of the
NASD/Nasdaq TRF rules to include reporting of over-the-counter trades
in non-Nasdaq exchange-listed securities.\9\
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\8\ See Securities Exchange Act Release No. 54084 (June 30,
2006), 71 FR 38935 (July 10, 2006) (order approving SR-NASD-2005-
087).
\9\ See Securities Exchange Act Release No. 54798 (November 21,
2006), 71 FR 69156 (November 29, 2006) (order approving SR-NASD-
2006-104).
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As originally approved, the rule changes in SR-NASD-2006-104 were
to become effective on the date that the Nasdaq Exchange commences
operation as a national securities exchange for non-Nasdaq exchange-
listed securities. However, as described in SR-NASD-2006-135, for a
transitional period, Nasdaq has continued to operate the
SuperIntermarket (SiM) trading platform on NASD's behalf via the
Transitional System and Regulatory Services Agreement.\10\ As
contemplated in SR-NASD-2006-135, the NASD has determined to continue
to use Nasdaq as a vendor to operate SiM, even upon the Nasdaq
Exchange's operation as an exchange for non-Nasdaq exchange-listed
securities, which is currently scheduled for February 12, 2007.\11\ As
such, the current rules relating to SiM will remain in place and the
approved rule changes to the Rule 4700 Series in SR-NASD-2006-104 will
not be implemented.
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\10\ See Securities Exchange Act Release No. 54984 (December 20,
2006), 71 FR 78245 (December 28, 2006) (notice of filing and
immediate effectiveness of SR-NASD-2006-135). In that filing,
amendments to the Plan of Allocation and Delegation of Functions by
NASD to Subsidiaries and the By-Laws of NASD, NASD Regulation and
NASD Dispute Resolution, and the deletion of the Nasdaq By-Laws,
which were previously approved in SR-NASD-2006-104, were implemented
on December 20, 2006 to reflect Nasdaq's complete separation from
NASD, and, on that same date, dissolution of NASD's controlling
share in Nasdaq.
\11\ See Securities Exchange Act Release No. 54984 (December 20,
2006), 71 FR 78245 (December 28, 2006) (notice of filing and
immediate effectiveness of SR-NASD-2006-135), infra note 13.
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In addition, the following rule changes that were approved pursuant
to SR-NASD-2006-104 will be implemented on the date upon which the
Nasdaq Exchange operates as a national securities exchange for non-
Nasdaq exchange-listed securities: (1) Deletion of the Rule 4900 Series
and the 4950 Series; and (2) adoption of new Rules 5120 (Other Trading
Practices) and 5130 (Obligation to Provide Information) relating to
trading otherwise than on an exchange. All other rule changes that are
part of SR-NASD-2006-104, and were not implemented pursuant to SR-NASD-
2006-135 (i.e., amendments to the Rule 0100 Series; amendments to the
Rule 4000 Series and Rule 6100 Series relating to the NASD/Nasdaq TRF;
deletion of Rule 4400; amendments to Rule 11890, Interpretive Material
(IM) 11890-1 and IM-11890-2; and the deletion of IM-11890-3), will be
implemented upon the operation of the ADF for non-Nasdaq exchange-
listed securities, which will be the Regulation NMS Trading Phase Date
(currently anticipated to be March 5, 2007).\12\
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\12\ Pursuant to SR-NASD-2006-091, among other changes, the
following will be deleted from the NASD Manual on the Trading Phase
Date: the Rule 5200 Series, the Rule 6300 Series and the Rule 6400
Series.
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In this proposed rule change, NASD is proposing two additional rule
changes that were not approved as part of SR-NASD-2006-104. First, NASD
is proposing to delete the Rule 4700 Series in its entirety upon the
operation of the ADF for non-Nasdaq exchange-listed securities.\13\
Second, NASD is proposing to delete Rule 5150 upon the operation of the
ADF for non-Nasdaq exchange-listed securities. Rule 5150 requires an
NASD member that is registered as a market maker with the Nasdaq
Exchange in a non-Nasdaq exchange-listed security to comply with the
provisions of NASD Rule 5262 relating to trade-throughs with respect to
that security for trades reported to NASD. Rule 5150 was approved by
the Commission on September 19, 2006 and will become effective on the
date that the Nasdaq Exchange operates as a national securities
exchange for non-Nasdaq exchange-listed securities.\14\ Upon the
operation of the ADF for non-Nasdaq exchange-listed securities, the
Rule 5200 Series, including Rule 5262, will be deleted pursuant to
NASD-2006-091. Thus, NASD is proposing to delete Rule 5150 on that same
date.
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\13\ Thus, in the period between commencement of operation of
the Nasdaq Exchange for non-Nasdaq exchange-listed securities and
the operation of the ADF for non-Nasdaq exchange-listed securities,
the Rule 4700 Series will remain in the NASD Manual as it exists
today. Upon the operation of the ADF for non-Nasdaq exchange-listed
securities, the Rule 4700 Series will be deleted in its entirety.
\14\ See Securities Exchange Act Release No. 54471 (September
19, 2006), 71 FR 56202 (September 26, 2006) (order approving SR-
NASD-2006-081).
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NASD has filed the proposed rule change for immediate
effectiveness. NASD proposes to implement the proposed rule change as
described herein.
2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\15\ which requires, among
other things, that NASD rules 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 will
provide an effective mechanism and regulatory framework for quoting and
trading activities otherwise than on an exchange in non-Nasdaq
exchange-listed securities upon the operation of the Nasdaq Exchange as
a national securities exchange for non-Nasdaq exchange-listed
securities and the operation of the ADF for non-Nasdaq exchange-listed
securities.
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\15\ 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.
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
Because the foregoing proposed rule change does not:
(i) Significantly affect the protection of investors or the public
interest;
(ii) impose any significant burden on competition; and
(iii) become operative for 30 days from the date on which it was
filed, or
[[Page 7787]]
such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act,\16\ and Rule 19b-
4(f)(6) thereunder.\17\ At any time within 60 days of the filing of the
proposed rule change the Commission may summarily abrogate such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally
does not become operative prior to 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\19\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The NASD has asked the
Commission to waive the 30-day pre-operative delay. The Commission
believes that such waiver is consistent with the protection of
investors and the public interest because it would allow the NASD to
update and clarify its rules.\20\ The Commission notes that the
proposed rule change will facilitate the implementation of NASD rules
that were subject to notice and comment and approved by the Commission
on November 21, 2006. For this reason, the Commission designates the
proposed rule change to be operative on the date that the Nasdaq
Exchange begins operations as a national securities exchange for non-
Nasdaq exchange-listed securities.
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\18\ Id.
\19\ 17 CFR 240.19b-4(f)(6)(iii).
\20\ For purposes only of waiving the operative date of this
proposal, the Commission has considered the rule's impact on
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
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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. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASD-2007-012 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASD-2007-012. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 also will be available for inspection and copying at the
principal office of NASD.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-NASD-2007-012
and should be submitted on or before March 13, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-2839 Filed 2-16-07; 8:45 am]
BILLING CODE 8010-01-P