[Federal Register: December 6, 2002 (Volume 67, Number 235)]
[Notices]
[Page 72715-72716]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de02-107]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46924; File No. SR-NASD-2002-170]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. Relating to the Primex Auction System[reg]
November 27, 2002.
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 November 26, 2002, the National Association of Securities Dealers,
Inc., through its subsidiary The Nasdaq Stock Market, Inc.
(``Nasdaq''), 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 Nasdaq. Nasdaq has
designated this proposal as effective upon filing pursuant to section
19(b)(3)(A)(iii) of the Act,\3\ and subparagraph (f)(2) of rule 19b-
5.\4\ 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)(iii).
\4\ 17 CFR 240.19b-5(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq is filing a proposed rule change to continue operating
Nasdaq's application of the Primex Auction System[reg] (``Primex'' or
``System'') as a Pilot Trading System, pursuant to rule 19b-5 of the
Act,\5\ until January 15, 2003, or until the Commission permanently
approves Primex, whichever period is shorter. Pursuant to paragraph (f)
of rule 19b-5,\6\ Nasdaq is filing this proposed rule change as
effective immediately. This filing does not propose any rule language
changes.
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\5\ 17 CFR 240.19b-5.
\6\ 17 CFR 240.19b-4(f).
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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, Nasdaq 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. Nasdaq 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
The Primex Auction System is a facility of Nasdaq that has been
operating as a Pilot Trading System (``PTS''), as defined in paragraph
(c)(2) of rule 19b-5 of the Act.\7\ As such, Nasdaq was not required to
file a proposed rule change under rule 19b-4 of the Act \8\ as long as
the Primex maintained its status as a PTS. Under paragraph (c)(2) of
rule 19b-5, a system must comply with three criteria to maintain its
status as a PTS.\9\ One such
[[Page 72716]]
criteria is that, for each security traded in the PTS, the PTS cannot
trade more than one percent of the average daily consolidated trading
volume of any such security, during at least two of the last four
consecutive calendar months. Nasdaq represents that Primex exceeded
this threshold for many securities. Therefore, Nasdaq filed a proposed
rule change seeking permanent approval of Primex.\10\ Nasdaq also filed
a proposed rule change to continue operating the System for up to six
months while the Commission considered granting permanent approval.\11\
This six-month period expired on October 31, 2002. On October 31, 2002,
Nasdaq filed a proposed rule change, which was effective upon filing,
to continue to operate Primex as a PTS until November 30, 2002.\12\ The
Commission is still considering Nasdaq's filing seeking permanent
approval of Primex. Accordingly, Nasdaq is filing this proposed rule
change to continue operating Primex as a PTS until January 15, 2003, or
until the Commission grants permanent approval, whichever period is
shorter. Primex continues to operate in the manner described in the
form PILOT filing, as amended.\13\
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\7\ 17 CFR 240.19b-5(c)(2).
\8\ 17 CFR 240.19b-4.
\9\ Pursuant to rule 19b-5(c)(2), to qualify as a Pilot Trading
System, a system must: (1) Be in operation for less than two years;
(2) with respect to each security traded on such Pilot Trading
System, during at least two of the last four consecutive calendar
months, has traded no more than one percent of the average daily
trading volume in the United States; and (3) with respect to all
securities traded on such Pilot Trading System, during at least two
of the last four consecutive calendar months, has traded no more
than 20 percent of the average daily trading volume of all trading
systems operated by the self-regulatory organization.
\10\ Securities Exchange Act Release No. 45983 (May 23, 2002) 67
FR 38152 (May 31, 2002).
\11\ Securities Exchange Act Release No. 45982 (May 23, 2002) 67
FR 38163 (May 31, 2002).
\12\ Securities Exchange Act Release No. 46756 (October 31,
2002), 67 FR 68221 (November 8, 2002).
\13\ Form PILOT-NASD-2001-01.
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2. Statutory Basis
Nasdaq believes the proposed rule change is consistent with the
provisions of sections 15A(b)(6)\14\ and 11A(a)(1) of the Act.\15\
Section 15A(b)(6) of the Act \16\ requires the rules of the NASD to be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest; and not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. Section 11A(a)(1) of the Act \17\ sets forth a
finding of Congress that new data processing and communications
techniques create opportunity for more efficient and effective market
operations.
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\14\ 15 U.S.C. 78o-3(b)(6).
\15\ 15 U.S.C. 78k-1(a)(1).
\16\ 15 U.S.C. 78o-3(b)(6).
\17\ 15 U.S.C. 78k-1(a)(1).
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Nasdaq believes this proposed rule change is consistent with the
NASD's obligations under the Act, as well as the finding of Congress,
because it will allow Nasdaq to continue operating Primex while the
Commission considers permanent approval. Among other things, the System
provides members with an additional electronic, execution system, which
is designed to provide members with flexibility in executing orders and
the opportunity to obtain price improvement. To ensure the protection
of investors, orders will not be executed at prices inferior to the
National Best Bid or Offer.
B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq 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
The foregoing rule change has become effective upon filing pursuant
to section 19(b)(3)(A)(iii) of the Act,\18\ and subparagraph (f)(2) of
rule 19b-5 thereunder,\19\ because the proposal will permit Nasdaq to
continue operating Primex as a PTS while the Commission considers
granting permanent approval. The proposal does not modify any rule or
the operation of Primex.
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\18\ 15 U.S.C. 78s(b)(3)(A)(iii).
\19\ 17 CFR 240.19b-4(f)(5).
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At any time within 60 days of the filing of a rule change pursuant
to section 19(b)(3)(A) of the Act,\20\ the Commission may summarily
abrogate the 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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\20\ 15 U.S.C. 78s(b)(3)(A).
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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 the
NASD. All submissions should refer to File No. SR-NASD-2002-170 and
should be submitted by December 27, 2002.
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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-30886 Filed 12-5-02; 8:45 am]
BILLING CODE 8010-01-P