Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Granting Approval to Proposed Rule Change and Amendment No. 3 Thereto To Adopt Additional Listing Standards Applicable to the Securities of the Nasdaq Stock Market, Inc. or an Affiliate, 6743-6744 [E5-512]

Download as PDF Federal Register / Vol. 70, No. 25 / Tuesday, February 8, 2005 / Notices and a national market system, and protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change, as amended, will impose any burden on competition 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 The Exchange has neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 15 and Rule 19b–4(f)(6) thereunder.16 A proposed rule change filed under Rule 19b–4(f)(6) 17 normally does not become operative prior to 30 days after the date of filing. However, Rule 19b– 4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the five-day prefiling requirement and the 30-day operative delay, as specified in Rule 19b–4(f)(6)(iii), and designate the proposed rule change immediately operative. The Commission believes that waiving the five-day pre-filing provision and the 30-day operative delay is consistent with the protection of investors and the public interest.18 By waiving the pre-filing requirement and accelerating the operative date, the Pilot Program can continue without interruption. The Commission believes that allowing the pilot to continue will allow Participants to either gather 15 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 17 17 Id. 18 For purposes of accelerating the operative date of this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 16 17 VerDate jul<14>2003 18:12 Feb 07, 2005 Jkt 205001 sufficient information to justify the need for the pilot program or determine that the exemption from trade-through liability is no longer necessary. Increasing the maximum number of contracts to be satisfied with respect to Satisfaction Orders in the last seven minutes of trading in options to 50 contracts will enhance customer order protection. At any time within 60 days of the filing of such 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. 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CBOE–2005–013 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609. All submissions should refer to File Number SR–CBOE–2005–013. 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 (https://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 the filing also will be available for inspection and copying at PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 6743 the principal offices of the CBOE. 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–CBOE–2005–013 and should be submitted on or before March 1, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.19 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–496 Filed 2–7–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51123; File No. SR–NASD– 2004–169] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Granting Approval to Proposed Rule Change and Amendment No. 3 Thereto To Adopt Additional Listing Standards Applicable to the Securities of the Nasdaq Stock Market, Inc. or an Affiliate February 2, 2005. I. Introduction On November 2, 2004, the National Association of Securities Dealers, Inc. (‘‘NASD’’), through its subsidiary, The Nasdaq Stock Market, Inc. (‘‘Nasdaq’’), filed with the Securities and Exchange Commission (‘‘Commission’’) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt additional listing standards that would apply to securities of Nasdaq or its affiliate listed on The Nasdaq Stock Market. On December 14, 2004, and December 15, 2004, Nasdaq filed Amendments No. 1 and No. 2, respectively.3 On December 15, 2004, Nasdaq filed Amendment No. 3 to the proposal.4 The proposed rule change 19 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Amendment No. 1 and Amendment No. 2 were deficient for technical reasons and were withdrawn on December 14 and December 15, 2004, respectively. 4 Amendment No. 3 slightly modified the text of the proposed rule to make clear that the exclusion in the definition of an Affiliate Security would encompass both portfolio depository receipts and index fund shares. The amendment also further 1 15 E:\FR\FM\08FEN1.SGM Continued 08FEN1 6744 Federal Register / Vol. 70, No. 25 / Tuesday, February 8, 2005 / Notices was published for notice and comment in the Federal Register on December 29, 2004.5 The Commission received no comments on the proposal. This order approves the proposed rule change, as amended. II. Description of the Proposal Nasdaq proposes to adopt new Rule 4370 that would impose additional reporting requirements on Nasdaq should Nasdaq or an affiliate of Nasdaq (collectively, the ‘‘Nasdaq Affiliates’’ or ‘‘Nasdaq Affiliate’’) 6 list a security on The Nasdaq Stock Market. In the event that a Nasdaq Affiliate lists a security on The Nasdaq Stock Market (the ‘‘Affiliate Security’’), the proposed rule change would require Nasdaq to file a report with the Commission on a monthly basis detailing Nasdaq’s monitoring of (1) the Nasdaq Affiliate’s compliance with the provisions of the Rule 4200, 4300 and 4400 Series,7 and (2) the trading of the Affiliate Security, including summaries of all related surveillance alerts, complaints, regulatory referrals, trades cancelled or adjusted pursuant to NASD Rule 11890, investigations, examinations, formal and informal disciplinary actions, exception reports and trading data. Nasdaq also would be required to notify the Commission at the same time it notifies the Nasdaq Affiliate if Nasdaq determines that the Nasdaq Affiliate was not in compliance with any of its listing standards. Nasdaq would be required to notify the Commission within five business days of its receipt of a plan of compliance from the Nasdaq Affiliate and advise the Commission on whether the plan of compliance was accepted by Nasdaq or what other action was taken with respect to the plan, and the time period provided to regain compliance with the Rule 4200, 4300 and 4400 Series, if any. In addition, Nasdaq would be required to commission an annual review and report by an independent accounting firm of the compliance of the Affiliate Security with the Rule 4200, 4300 and 4400 Series. Nasdaq would be required to furnish promptly a copy of the report to the Commission. clarifies and explains the proposed rule change. Amendment No. 3 was incorporated into the notice. 5 See Securities Exchange Act Release No. 50897 (December 21, 2004), 69 FR 78076. 6 The NASD currently would be considered a Nasdaq Affiliate for purposes of the proposed rule change. 7 These rules include quantitative (minimum bid price, number of round lot holders, number of publicly held shares, market value, etc.) and qualitative (concerning independent directors, audit committee, shareholder meetings, etc.) requirements for initial and continued inclusion of securities in The Nasdaq Stock Market, as well as issuer designation requirements. VerDate jul<14>2003 18:12 Feb 07, 2005 Jkt 205001 Solely for the purposes of Rule 4370, Nasdaq proposes to exclude from the definition of ‘‘Affiliate Security’’ securities that meet the definition of ‘‘Portfolio Depository Receipts’’ under NASD Rule 4420(i)(1)(A) and ‘‘Index Fund Shares’’ under NASD Rule 4420(j)(1)(A).8 Nasdaq believes that the additional requirements contained in Rule 4370 would provide additional assurance that any securities listed on The Nasdaq Stock Market by a Nasdaq Affiliate comply with Nasdaq’s listing standards on an on-going basis. Nasdaq believes that the proposed rule change would eliminate any perception of a potential conflict of interest if a Nasdaq Affiliate seeks to list a security on The Nasdaq Stock Market. III. Discussion and Commission Findings The Commission has reviewed carefully the proposed rule change, as amended, and finds that it is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association.9 In particular, the Commission believes that the proposal, as amended, is consistent with Section 15A(b)(6) of the Act,10 which requires that an association’s rules be designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, remove impediments to, and perfect the mechanism of, a free and open market and, in general, protect investors and the public interest. The Commission also finds that the proposed rule change, as amended, is consistent with Section 15A(b)(2) of the Act,11 which requires a national securities association to be so organized and have the capacity to be able to carry out the purposes of the Act and to enforce compliance by its members and persons associated with its members with the provisions of the Act, the rules and regulations thereunder, and the rules of the association. The listing of an Affiliate Security on The Nasdaq Stock Market could potentially create a conflict of interest between the NASD’s, Nasdaq’s, and NASD Regulation, Inc.’s (‘‘NASDR’’) regulatory responsibilities to vigorously oversee the listing and trading of an Affiliate Security on The Nasdaq Stock 8 These securities are types of exchange-traded funds (‘‘ETFs’’). 9 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 10 15 U.S.C. 78o–3(b)(6). 11 15 U.S.C. 78o–3(b)(2). PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 Market, and their own commercial or economic interests. Such ‘‘self-listing’’ may raise questions as to the NASD’s, Nasdaq’s, and NASDR’s ability to independently and effectively enforce the Commission’s and the NASD’s rules against an affiliate of Nasdaq. In addition, such listing has the potential to exacerbate possible conflicts that may arise when these entities oversee competitors that may also be listed on The Nasdaq Stock Market. The Commission believes that the proposed rule change, by requiring heightened reporting by Nasdaq to the Commission with respect to oversight of the listing and trading on The Nasdaq Stock Market of an Affiliate Security, will help protect against concerns that Nasdaq will not effectively enforce its rules with respect to the listing and trading of these securities. In addition, the requirement that an independent accounting firm review such issuer’s compliance with Nasdaq’s listing standards adds a degree of independent oversight to Nasdaq’s regulation of the listing of these securities, which may mitigate any potential or actual conflicts of interest.12 IV. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act,13 that the proposed rule change (File No. SR– NASD–2004–169), as amended, be and hereby is, approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.14 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–512 Filed 2–7–05; 8:45 am] BILLING CODE 8010–01–P SMALL BUSINESS ADMINISTRATION Reporting and Recordkeeping Requirements Under OMB Review AGENCY: Small Business Administration. 12 On December 8, 2004, the Commission published for comment a proposed rulemaking that would impose reporting and other requirements on a self-regulatory organization (‘‘SRO’’) that chooses to list or trade its own securities, the securities of any trading facility, the securities of an affiliate of the SRO, or the securities of an affiliate of a trading facility of the SRO. Unlike the NASD’s proposed rule change, the Commission’s proposed rule would apply to investment companies that track an index, such as exchange-traded funds. See Securities Exchange Act Release No. 50699, 69 FR 71126 (December 8, 2004). The NASD would, of course, have to conform its rules to any rules the Commission may adopt in the future. 13 15 U.S.C. 78s(b)(2). 14 17 CFR 200.30–3(a)(12). E:\FR\FM\08FEN1.SGM 08FEN1

Agencies

[Federal Register Volume 70, Number 25 (Tuesday, February 8, 2005)]
[Notices]
[Pages 6743-6744]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-512]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51123; File No. SR-NASD-2004-169]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Granting Approval to Proposed Rule Change and 
Amendment No. 3 Thereto To Adopt Additional Listing Standards 
Applicable to the Securities of the Nasdaq Stock Market, Inc. or an 
Affiliate

February 2, 2005.

I. Introduction

    On November 2, 2004, the National Association of Securities 
Dealers, Inc. (``NASD''), through its subsidiary, The Nasdaq Stock 
Market, Inc. (``Nasdaq''), filed with the Securities and Exchange 
Commission (``Commission'') pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to adopt additional listing 
standards that would apply to securities of Nasdaq or its affiliate 
listed on The Nasdaq Stock Market. On December 14, 2004, and December 
15, 2004, Nasdaq filed Amendments No. 1 and No. 2, respectively.\3\ On 
December 15, 2004, Nasdaq filed Amendment No. 3 to the proposal.\4\ The 
proposed rule change

[[Page 6744]]

was published for notice and comment in the Federal Register on 
December 29, 2004.\5\ The Commission received no comments on the 
proposal.
    This order approves the proposed rule change, as amended.

II. Description of the Proposal

    Nasdaq proposes to adopt new Rule 4370 that would impose additional 
reporting requirements on Nasdaq should Nasdaq or an affiliate of 
Nasdaq (collectively, the ``Nasdaq Affiliates'' or ``Nasdaq 
Affiliate'') \6\ list a security on The Nasdaq Stock Market. In the 
event that a Nasdaq Affiliate lists a security on The Nasdaq Stock 
Market (the ``Affiliate Security''), the proposed rule change would 
require Nasdaq to file a report with the Commission on a monthly basis 
detailing Nasdaq's monitoring of (1) the Nasdaq Affiliate's compliance 
with the provisions of the Rule 4200, 4300 and 4400 Series,\7\ and (2) 
the trading of the Affiliate Security, including summaries of all 
related surveillance alerts, complaints, regulatory referrals, trades 
cancelled or adjusted pursuant to NASD Rule 11890, investigations, 
examinations, formal and informal disciplinary actions, exception 
reports and trading data.
    Nasdaq also would be required to notify the Commission at the same 
time it notifies the Nasdaq Affiliate if Nasdaq determines that the 
Nasdaq Affiliate was not in compliance with any of its listing 
standards. Nasdaq would be required to notify the Commission within 
five business days of its receipt of a plan of compliance from the 
Nasdaq Affiliate and advise the Commission on whether the plan of 
compliance was accepted by Nasdaq or what other action was taken with 
respect to the plan, and the time period provided to regain compliance 
with the Rule 4200, 4300 and 4400 Series, if any.
    In addition, Nasdaq would be required to commission an annual 
review and report by an independent accounting firm of the compliance 
of the Affiliate Security with the Rule 4200, 4300 and 4400 Series. 
Nasdaq would be required to furnish promptly a copy of the report to 
the Commission.
    Solely for the purposes of Rule 4370, Nasdaq proposes to exclude 
from the definition of ``Affiliate Security'' securities that meet the 
definition of ``Portfolio Depository Receipts'' under NASD Rule 
4420(i)(1)(A) and ``Index Fund Shares'' under NASD Rule 
4420(j)(1)(A).\8\
    Nasdaq believes that the additional requirements contained in Rule 
4370 would provide additional assurance that any securities listed on 
The Nasdaq Stock Market by a Nasdaq Affiliate comply with Nasdaq's 
listing standards on an on-going basis. Nasdaq believes that the 
proposed rule change would eliminate any perception of a potential 
conflict of interest if a Nasdaq Affiliate seeks to list a security on 
The Nasdaq Stock Market.

III. Discussion and Commission Findings

    The Commission has reviewed carefully the proposed rule change, as 
amended, and finds that it is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to a national 
securities association.\9\ In particular, the Commission believes that 
the proposal, as amended, is consistent with Section 15A(b)(6) of the 
Act,\10\ which requires that an association's rules be designed to 
prevent fraudulent and manipulative acts and practices, promote just 
and equitable principles of trade, remove impediments to, and perfect 
the mechanism of, a free and open market and, in general, protect 
investors and the public interest. The Commission also finds that the 
proposed rule change, as amended, is consistent with Section 15A(b)(2) 
of the Act,\11\ which requires a national securities association to be 
so organized and have the capacity to be able to carry out the purposes 
of the Act and to enforce compliance by its members and persons 
associated with its members with the provisions of the Act, the rules 
and regulations thereunder, and the rules of the association.
    The listing of an Affiliate Security on The Nasdaq Stock Market 
could potentially create a conflict of interest between the NASD's, 
Nasdaq's, and NASD Regulation, Inc.'s (``NASDR'') regulatory 
responsibilities to vigorously oversee the listing and trading of an 
Affiliate Security on The Nasdaq Stock Market, and their own commercial 
or economic interests. Such ``self-listing'' may raise questions as to 
the NASD's, Nasdaq's, and NASDR's ability to independently and 
effectively enforce the Commission's and the NASD's rules against an 
affiliate of Nasdaq. In addition, such listing has the potential to 
exacerbate possible conflicts that may arise when these entities 
oversee competitors that may also be listed on The Nasdaq Stock Market.
    The Commission believes that the proposed rule change, by requiring 
heightened reporting by Nasdaq to the Commission with respect to 
oversight of the listing and trading on The Nasdaq Stock Market of an 
Affiliate Security, will help protect against concerns that Nasdaq will 
not effectively enforce its rules with respect to the listing and 
trading of these securities. In addition, the requirement that an 
independent accounting firm review such issuer's compliance with 
Nasdaq's listing standards adds a degree of independent oversight to 
Nasdaq's regulation of the listing of these securities, which may 
mitigate any potential or actual conflicts of interest.\12\

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\13\ that the proposed rule change (File No. SR-NASD-2004-169), as 
amended, be and hereby is, approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
Margaret H. McFarland,
Deputy Secretary.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 and Amendment No. 2 were deficient for 
technical reasons and were withdrawn on December 14 and December 15, 
2004, respectively.
    \4\ Amendment No. 3 slightly modified the text of the proposed 
rule to make clear that the exclusion in the definition of an 
Affiliate Security would encompass both portfolio depository 
receipts and index fund shares. The amendment also further clarifies 
and explains the proposed rule change. Amendment No. 3 was 
incorporated into the notice.
    \5\ See Securities Exchange Act Release No. 50897 (December 21, 
2004), 69 FR 78076.
    \6\ The NASD currently would be considered a Nasdaq Affiliate 
for purposes of the proposed rule change.
    \7\ These rules include quantitative (minimum bid price, number 
of round lot holders, number of publicly held shares, market value, 
etc.) and qualitative (concerning independent directors, audit 
committee, shareholder meetings, etc.) requirements for initial and 
continued inclusion of securities in The Nasdaq Stock Market, as 
well as issuer designation requirements.
    \8\ These securities are types of exchange-traded funds 
(``ETFs'').
    \9\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78o-3(b)(6).
    \11\ 15 U.S.C. 78o-3(b)(2).
    \12\ On December 8, 2004, the Commission published for comment a 
proposed rulemaking that would impose reporting and other 
requirements on a self-regulatory organization (``SRO'') that 
chooses to list or trade its own securities, the securities of any 
trading facility, the securities of an affiliate of the SRO, or the 
securities of an affiliate of a trading facility of the SRO. Unlike 
the NASD's proposed rule change, the Commission's proposed rule 
would apply to investment companies that track an index, such as 
exchange-traded funds. See Securities Exchange Act Release No. 
50699, 69 FR 71126 (December 8, 2004). The NASD would, of course, 
have to conform its rules to any rules the Commission may adopt in 
the future.
    \13\ 15 U.S.C. 78s(b)(2).
    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

 [FR Doc. E5-512 Filed 2-7-05; 8:45 am]
BILLING CODE 8010-01-P
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