Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Relating to the Reporting of Data to Clearing Firms by Correspondent Firms, 43204-43206 [E5-3928]
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43204
Federal Register / Vol. 70, No. 142 / Tuesday, July 26, 2005 / Notices
The options exchanges have agreed to
adopt a de minimus exception to the 80/
20 Test. As proposed by the Exchange,
the 80/20 Test would not apply to any
market maker that has total volume of
less than 1000 contracts in an option
during a calendar quarter. At this low
volume, even a small number of
Principal Orders could result in the
market maker being disqualified from
Linkage in that class for a calendar
quarter. The Exchange believes that this
proposed exception would address such
concerns.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act 5 in general and
furthers the objectives of Section
6(b)(5) 6 in particular in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, 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. The
Exchange further believes that the
proposed rule change will conform the
ISE’s rules to the Linkage Plan and
provide market makers with greater
access to the Linkage.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The ISE does not believe that the
proposed rule change will impose any
burden on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
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 Exchange 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.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form at https://www.sec.gov/
rules/sro.shtml or send an e-mail to
rule-comments@sec.gov. Please include
File No. SR–ISE–2005–23 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
No. SR–ISE–2005–23. 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, 100 F Street, NE., Washington,
DC 20549. Copies of such filing also will
be available for inspection and copying
at the principal office of the ISE. 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–ISE–2005–23 and should be
submitted on or before August 16, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.7
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–3969 Filed 7–25–05; 8:45 am]
BILLING CODE 8010–01–P
5 15
U.S.C. 78f(b).
6 15 U.S.C. 78f(b)(5).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52059; File No. SR–NASD–
2005–58]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing of
Proposed Rule Change and
Amendment No. 1 Relating to the
Reporting of Data to Clearing Firms by
Correspondent Firms
July 19, 2005.
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 May 2,
2005, 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 NASD. On July
14, 2005, NASD filed Amendment No.
1 to the proposed rule change.3 The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASD is proposing to amend NASD
Rule 3150 and Rule 3230 governing the
reporting of data to clearing firms by
correspondent firms. Below is the text of
the proposed rule change. Proposed new
language is in italics; proposed
deletions are in brackets.
*
*
*
*
*
3150. Reporting Requirements for
Clearing Firms
(a) No change.
(b) Each member that is a clearing
firm is required to report prescribed
data to NASD under this Rule in such
a manner as to enable NASD to
distinguish between data pertaining to
all proprietary and customer accounts
of an introducing member and data
pertaining to all proprietary and
customer accounts of any member for
which the introducing member is acting
as an intermediary in obtaining clearing
services from a clearing firm. The
reporting requirements of this
paragraph (b) shall apply to the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b-4.
3 Amendment No. 1, which replaced and
superseded the original filing in its entirety,
clarifies which piggybacking arrangements will be
subject to the rule and modifies certain rule
language to conform with other terms used in
NASD rules.
2 17
E:\FR\FM\26JYN1.SGM
26JYN1
Federal Register / Vol. 70, No. 142 / Tuesday, July 26, 2005 / Notices
proprietary and customer accounts of
members that have established an
intermediary clearing arrangement with
an introducing member on or after
[insert effective date of this paragraph
(b)].
[(b)](c) Pursuant to the Rule 9600
Series, NASD may in exceptional and
unusual circumstances, taking into
consideration all relevant factors,
exempt a member or class of members
unconditionally or on specified terms
from any or all of the provisions of this
Rule that it deems appropriate.
*
*
*
*
*
3230. Clearing Agreements
(a) through (g) No change.
(h) All clearing agreements shall
require each introducing member to
maintain its proprietary and customer
accounts and the proprietary and
customer accounts of any member for
which it is acting as an intermediary in
obtaining clearing services from the
clearing firm in such a manner as to
enable the clearing firm and NASD to
identify data belonging to the
proprietary and customer accounts of
each member. The requirements of this
paragraph (h) shall apply to
intermediary clearing arrangements
between a member and an introducing
member that are established on or after
[insert effective date of this paragraph
(h)].
*
*
*
*
*
II. 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
By way of background, some NASD
members choose not to contract for
clearing services directly with a clearing
firm. The reasons vary. For example, the
member may not do a sufficient
business to satisfy clearing firm
financial and other requirements to
support a separate clearing agreement.
In such cases, a member may contract
VerDate jul<14>2003
23:45 Jul 25, 2005
Jkt 205001
for clearing services with an
introducing, or intermediary, firm that,
in turn, contracts directly with a
clearing firm for clearing services.
Members that contract for clearing
services with an introducing firm are
often referred to as ‘‘piggybacking’’
firms, or ‘‘piggybackers.’’ Under this
arrangement, only the introducing firm
has a contractual arrangement with the
clearing firm, which clears for both the
introducing firm and the introducing
firm’s piggybacking firms. Under
current practice, the intermediary firm
may assign account numbers to the
piggybacker’s accounts (both proprietary
and customer accounts) that do not
identify them to the clearing firm as
belonging to a piggybacking firm. For
example, the introducing firm may
assign account numbers that identify
these accounts as branch offices of the
introducing firm.
Although these piggybacking
arrangements may satisfy the business
needs of the parties—the clearing firm,
the introducing firm, and the
piggybacking firm—they impede NASD
regulatory programs and may cause
problems for the clearing firm. For
example, under Rule 3150, clearing
firms are required to report certain data
to NASD for purposes of the
surveillance component of its National
Examination Program (‘‘NEP’’). In
fulfilling its reporting obligation under
Rule 3150, a clearing firm whose clients
include introducing firms that have
contracted with piggybackers may be
reporting the combined data of the
introducing firm and its piggybackers as
only belonging to the introducing firm.
In such cases, NASD staff is not able to
distinguish between data belonging to
the introducing firm and data belonging
to the piggybacking firm(s) for purposes
of conducting surveillance.
This inability to separate out the data
can, and already has, become a serious
issue where the intermediary firm goes
into SIPC (‘‘Securities Investor
Protection Corporation’’) liquidation. If
the data from the intermediary and
piggybacking firms are not
distinguishable, the clearing firm will be
unable to facilitate the orderly transfer
of accounts without doing timeintensive research and creating a special
program to separate accounts belonging
to the introducing firm and its
piggybacker(s).
To resolve these issues, NASD is
proposing to adopt amendments to Rule
3150 (governing reporting requirements
for clearing firms) and Rule 3230
(governing clearing agreements) that
would permit regulators and clearing
firms to distinguish between data
belonging to an introducing firm and
PO 00000
Frm 00093
Fmt 4703
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43205
data belonging to its piggybacker(s). The
proposed amendments to Rule 3150
would require clearing firms to report
data to NASD about each piggybacking
firm separately from the introducing
firm’s data. The proposed requirements
would apply to the data pertaining to
the proprietary and customer accounts
of piggybacking firms only if the
piggybacking relationship with the
introducing firm was established on or
after the effective date of this proposed
rule change.
The proposed amendments to Rule
3230 would require introducing firms to
maintain data in such a way as to enable
NASD and the clearing firm to be able
to identify the data pertaining to the
proprietary and customer accounts of
the introducing firm and the data
pertaining to the proprietary and
customer accounts of any piggybacking
firm. These proposed rule changes will
enable NASD staff to surveil data
reported by piggybacking firms as part
of its NEP Surveillance program and
facilitate any future SIPC liquidations.
The requirements of the proposed rule
change would apply only to the data
belonging to the proprietary and
customer accounts of any piggybacking
firm only if the piggybacking
relationship was established on or after
the effective date of the proposed rule
change.4
NASD will announce the effective
date of the proposed rule change in a
Notice to Members to be published no
later than 60 days following
Commission approval. NASD is
proposing an effective date of 180 days
following Commission approval. This
will give members time to make
necessary changes to their systems.
2. Statutory Basis
NASD believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act, which
4 NASD understands that requiring firms to
convert existing accounts would potentially burden
customers as the clearing firm may need to issue
new account numbers and, as applicable, new debit
cards, checking accounts, and passwords issued in
connection with the accounts. Accordingly, the
piggybacking firms would have to advise these
customers in writing that they would be getting new
account numbers, and why, and would need to
change their records to reflect new customer
account numbers. Further, NASD understands that
some clearing firms would have to convert such
existing accounts to accounts under the customers’
names manually, entry by entry. Other data, such
as cost basis information, also might have to be
manually transferred to the new accounts.
Accordingly, while NASD recognizes that there is
some risk in not being able to surveil data belonging
to accounts held by firms who are currently in
piggybacking clearing relationships, it does not
believe that the regulatory benefit in requiring such
conversion would outweigh the expense and
inconvenience to customers and firms.
E:\FR\FM\26JYN1.SGM
26JYN1
43206
Federal Register / Vol. 70, No. 142 / Tuesday, July 26, 2005 / Notices
requires, among other things, that NASD
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 is designed to accomplish these
ends by giving regulators and clearing
firms the ability to determine whether
data being reported to clearing firms
belongs to an introducing firm or a
piggybacking firm. The proposed rule
change will enable NASD staff to more
clearly identify data being reported to
NASD for purposes of NASD’s NEP
Surveillance and, in those instances
where an introducing firm enters a SIPC
liquidation, will help to facilitate an
orderly liquidation.
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 Exchange consents,
the Commission will:
(A) By order approve such proposed
rule change, as amended, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
Number SR–NASD–2005–58 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
Number SR–NASD–2005–58. 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, 100 F Street, NE., Washington,
DC 20549. 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–2005–58 and should
be submitted on or before August 16,
2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.5
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–3928 Filed 7–22–05; 8:45 am]
BILLING CODE 8010–01–P
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:
SELECTIVE SERVICE SYSTEM
Forms Submitted to the Office of
Management and Budget for Extension
of Clearance
Selective Service System.
Notice.
AGENCY:
Electronic Comments
ACTION:
• 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
I. The following forms have been
submitted to the Office of Management
and Budget (OMB) for extension of
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5 17
CFR 200.30–3(a)(12).
Frm 00094
Fmt 4703
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clearance in compliance with the
Paperwork Reduction Act (44 U.S.C.
Chapter 35):
SSS–2, 3A&B, 3C
Title: The Selective Service System
Change of Information, Correction/
Change Form and Registration Status
Forms.
Purpose: To insure the accuracy and
completeness of the Selective Service
System registration data.
Respondents: Registrants are required
to report changes to corrections in data
submitted in SSS Form 1.
Frequency: When changes in a
registrant’s name or address occur.
Burden: The reporting burden is two
minutes or less per report.
SSS–402
Title: Uncompensated Registrar
Appointment.
Purpose: Is used to verify the official
status of applicants for the position of
Uncompensated Registrars and to
establish authority for those appointed
to perform as Selective Service System
Registrars.
Respondents: United States citizens
over the age of 18.
Frequency: One-time.
Burden: The reporting burden is three
minutes or less.
II. The following forms, to be used
only in the event that inductions into
the armed services are resumed, have
been submitted to the Office of
Management and Budget (OMB) for the
extension of clearance in compliance
with the Paperwork Reduction Act (44
U.S.C. Chapter 35):
SSS–9
Title: Registrant Claim Form.
Purpose: Form is used to submit a
claim for postponement or induction or
reclassification.
Respondents: Registrants filing claims
for either postponement or
reclassification.
Frequency: One-time.
Burden: The reporting burden is five
minutes or less per individual.
SSS–21
Title: Claim Documentation Form—
Administrative.
Purpose: Is used to document those
claims for reclassification which can be
approved by an Area Office upon the
presentation of documentary proof.
Respondents: Registrants whose past
or present status is reason for
reclassification.
Frequency: One-time.
Burden: The reporting burden is ten
minutes or less per individual.
E:\FR\FM\26JYN1.SGM
26JYN1
]]>Agencies
[Federal Register Volume 70, Number 142 (Tuesday, July 26, 2005)]
[Notices]
[Pages 43204-43206]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-3928]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52059; File No. SR-NASD-2005-58]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment
No. 1 Relating to the Reporting of Data to Clearing Firms by
Correspondent Firms
July 19, 2005.
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 May 2, 2005, 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 NASD. On July 14,
2005, NASD filed Amendment No. 1 to the proposed rule change.\3\ The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1, which replaced and superseded the original
filing in its entirety, clarifies which piggybacking arrangements
will be subject to the rule and modifies certain rule language to
conform with other terms used in NASD rules.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD is proposing to amend NASD Rule 3150 and Rule 3230 governing
the reporting of data to clearing firms by correspondent firms. Below
is the text of the proposed rule change. Proposed new language is in
italics; proposed deletions are in brackets.
* * * * *
3150. Reporting Requirements for Clearing Firms
(a) No change.
(b) Each member that is a clearing firm is required to report
prescribed data to NASD under this Rule in such a manner as to enable
NASD to distinguish between data pertaining to all proprietary and
customer accounts of an introducing member and data pertaining to all
proprietary and customer accounts of any member for which the
introducing member is acting as an intermediary in obtaining clearing
services from a clearing firm. The reporting requirements of this
paragraph (b) shall apply to the
[[Page 43205]]
proprietary and customer accounts of members that have established an
intermediary clearing arrangement with an introducing member on or
after [insert effective date of this paragraph (b)].
[(b)](c) Pursuant to the Rule 9600 Series, NASD may in exceptional
and unusual circumstances, taking into consideration all relevant
factors, exempt a member or class of members unconditionally or on
specified terms from any or all of the provisions of this Rule that it
deems appropriate.
* * * * *
3230. Clearing Agreements
(a) through (g) No change.
(h) All clearing agreements shall require each introducing member
to maintain its proprietary and customer accounts and the proprietary
and customer accounts of any member for which it is acting as an
intermediary in obtaining clearing services from the clearing firm in
such a manner as to enable the clearing firm and NASD to identify data
belonging to the proprietary and customer accounts of each member. The
requirements of this paragraph (h) shall apply to intermediary clearing
arrangements between a member and an introducing member that are
established on or after [insert effective date of this paragraph (h)].
* * * * *
II. 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
By way of background, some NASD members choose not to contract for
clearing services directly with a clearing firm. The reasons vary. For
example, the member may not do a sufficient business to satisfy
clearing firm financial and other requirements to support a separate
clearing agreement. In such cases, a member may contract for clearing
services with an introducing, or intermediary, firm that, in turn,
contracts directly with a clearing firm for clearing services. Members
that contract for clearing services with an introducing firm are often
referred to as ``piggybacking'' firms, or ``piggybackers.'' Under this
arrangement, only the introducing firm has a contractual arrangement
with the clearing firm, which clears for both the introducing firm and
the introducing firm's piggybacking firms. Under current practice, the
intermediary firm may assign account numbers to the piggybacker's
accounts (both proprietary and customer accounts) that do not identify
them to the clearing firm as belonging to a piggybacking firm. For
example, the introducing firm may assign account numbers that identify
these accounts as branch offices of the introducing firm.
Although these piggybacking arrangements may satisfy the business
needs of the parties--the clearing firm, the introducing firm, and the
piggybacking firm--they impede NASD regulatory programs and may cause
problems for the clearing firm. For example, under Rule 3150, clearing
firms are required to report certain data to NASD for purposes of the
surveillance component of its National Examination Program (``NEP'').
In fulfilling its reporting obligation under Rule 3150, a clearing firm
whose clients include introducing firms that have contracted with
piggybackers may be reporting the combined data of the introducing firm
and its piggybackers as only belonging to the introducing firm. In such
cases, NASD staff is not able to distinguish between data belonging to
the introducing firm and data belonging to the piggybacking firm(s) for
purposes of conducting surveillance.
This inability to separate out the data can, and already has,
become a serious issue where the intermediary firm goes into SIPC
(``Securities Investor Protection Corporation'') liquidation. If the
data from the intermediary and piggybacking firms are not
distinguishable, the clearing firm will be unable to facilitate the
orderly transfer of accounts without doing time-intensive research and
creating a special program to separate accounts belonging to the
introducing firm and its piggybacker(s).
To resolve these issues, NASD is proposing to adopt amendments to
Rule 3150 (governing reporting requirements for clearing firms) and
Rule 3230 (governing clearing agreements) that would permit regulators
and clearing firms to distinguish between data belonging to an
introducing firm and data belonging to its piggybacker(s). The proposed
amendments to Rule 3150 would require clearing firms to report data to
NASD about each piggybacking firm separately from the introducing
firm's data. The proposed requirements would apply to the data
pertaining to the proprietary and customer accounts of piggybacking
firms only if the piggybacking relationship with the introducing firm
was established on or after the effective date of this proposed rule
change.
The proposed amendments to Rule 3230 would require introducing
firms to maintain data in such a way as to enable NASD and the clearing
firm to be able to identify the data pertaining to the proprietary and
customer accounts of the introducing firm and the data pertaining to
the proprietary and customer accounts of any piggybacking firm. These
proposed rule changes will enable NASD staff to surveil data reported
by piggybacking firms as part of its NEP Surveillance program and
facilitate any future SIPC liquidations. The requirements of the
proposed rule change would apply only to the data belonging to the
proprietary and customer accounts of any piggybacking firm only if the
piggybacking relationship was established on or after the effective
date of the proposed rule change.\4\
---------------------------------------------------------------------------
\4\ NASD understands that requiring firms to convert existing
accounts would potentially burden customers as the clearing firm may
need to issue new account numbers and, as applicable, new debit
cards, checking accounts, and passwords issued in connection with
the accounts. Accordingly, the piggybacking firms would have to
advise these customers in writing that they would be getting new
account numbers, and why, and would need to change their records to
reflect new customer account numbers. Further, NASD understands that
some clearing firms would have to convert such existing accounts to
accounts under the customers' names manually, entry by entry. Other
data, such as cost basis information, also might have to be manually
transferred to the new accounts. Accordingly, while NASD recognizes
that there is some risk in not being able to surveil data belonging
to accounts held by firms who are currently in piggybacking clearing
relationships, it does not believe that the regulatory benefit in
requiring such conversion would outweigh the expense and
inconvenience to customers and firms.
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NASD will announce the effective date of the proposed rule change
in a Notice to Members to be published no later than 60 days following
Commission approval. NASD is proposing an effective date of 180 days
following Commission approval. This will give members time to make
necessary changes to their systems.
2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act, which
[[Page 43206]]
requires, among other things, that NASD 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 is
designed to accomplish these ends by giving regulators and clearing
firms the ability to determine whether data being reported to clearing
firms belongs to an introducing firm or a piggybacking firm. The
proposed rule change will enable NASD staff to more clearly identify
data being reported to NASD for purposes of NASD's NEP Surveillance
and, in those instances where an introducing firm enters a SIPC
liquidation, will help to facilitate an orderly liquidation.
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 Exchange consents, the Commission will:
(A) By order approve such proposed rule change, as amended, 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. 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 rule-comments@sec.gov. Please include
File Number SR-NASD-2005-58 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-NASD-2005-58. 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, 100 F Street,
NE., Washington, DC 20549. 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-2005-58 and
should be submitted on or before August 16, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
Jill M. Peterson,
Assistant Secretary.
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\5\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E5-3928 Filed 7-22-05; 8:45 am]
BILLING CODE 8010-01-P
