Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend NASD Rule 11890, 58762-58764 [E5-5533]

Download as PDF 58762 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Notices interest, 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: For the Commission by the Division of Market Regulation, pursuant to delegated authority.8 Jonathan G. Katz, Secretary. [FR Doc. E5–5524 Filed 10–6–05; 8:45 am] 11890. Clearly Erroneous Transactions BILLING CODE 8010–01–P (2) Procedures for Reviewing Transactions SECURITIES AND EXCHANGE COMMISSION 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–DTC–2005–10 on the subject line. [Release No. 34–52549; File No. SR–NASD– 2005–115] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend NASD Rule 11890 Paper Comments October 3, 2005 • 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–DTC–2005–10. 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 Section, 100 F Street, NE., Washington, DC 20549. Copies of such filings also will be available for inspection and copying at the principal office of DTC and on DTC’s Web site at https:// www.DTCC.com. 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–DTC–2005–10 and should be submitted on or before October 28, 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 September 22, 2005, 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’’) the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. Nasdaq filed the proposal as a ‘‘non-controversial’’ rule change pursuant to Section 19(b)(3)(A) of the Act,3 and Rule 19b– 4(f)(6) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. VerDate Aug<31>2005 18:27 Oct 06, 2005 Jkt 208001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to clarify the scope of a recent amendment to NASD Rule 11890. Nasdaq proposes to implement the proposed rule change on September 26, 2005. Below is the text of the proposed rule change. Proposed new language is in italics; proposed deletions are in [brackets].5 * * * * * 8 17 CFR 200.30–3(a)(12). 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). 5 The proposed rule change is marked to show changes from the rule as it appears in the electronic NASD Manual available at https://www.nasd.com. 1 15 PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 (a) Authority to Review Transactions Pursuant to Complaint of Market Participant (1) No change. (A)–(B) No change. (C) Following the expiration of the period for submission of supporting material, a Nasdaq officer shall determine whether the complaint is eligible for review. A complaint shall not be eligible for review under paragraph (a) unless: (i) the complainant has provided all of the supporting information required under paragraph (a)(2)(B), and (ii) For trades executed between 9:30 a.m. and 4:00 p.m. Eastern Time, [T]the price of transaction to buy (sell) that is the subject of the complaint is greater than (less than) the best offer (best bid) by an amount that equals or exceeds the minimum threshold set forth below: Inside price $0–0.99 ............. 1.00–4.99 .......... 5.00–14.99 ........ 15 or more ........ Minimum threshold $0.02 + (0.10 × Inside Price) 0.12 + (0.07 × (Inside Price¥1.00)) 0.40 + (0.06 × (Inside Price—5.00)) 1.00 For a transaction to buy (sell) a Nasdaq listed security, the inside price shall be the best offer (best bid) in Nasdaq at the time that the first share of the order that resulted in the disputed transaction was executed, and for a transaction to buy (sell) an exchangelisted security, the inside price shall be the national best offer (best bid) at the time that the first share of the order that resulted in the disputed transaction was executed. (D)–(G) No change. (b) No change. * * * * * 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. E:\FR\FM\07OCN1.SGM 07OCN1 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose NASD Rule 11890(a) allows designated officers of Nasdaq to declare transactions that arise out of the use or operation of Nasdaq execution or communications systems to be clearly erroneous and to nullify or modify the terms of such transactions. In SR– NASD–2004–009,6 Nasdaq established a minimum price deviation threshold to provide a ‘‘bright line’’ rule standard for determining when transactions are considered eligible for review. A transaction price that meets these thresholds does not automatically trigger a clearly erroneous determination, but if the transaction price does not meet these thresholds the transaction will not be considered for clearly erroneous review. Thus, there is now a conclusive presumption that a transaction to buy (sell) is not clearly erroneous unless its price is greater than (less than) the best offer (best bid) by an amount that equals or exceeds the minimum threshold set forth below: Inside price Minimum threshold $0–$.99 ............. 1.00–4.99 .......... 5.00–14.99 ........ 15 or more ........ $0.02 + (0.10 × Inside Price) 0.12 + (0.07 × (Inside Price—1.00)) $0.40 + (0.06 × (Inside Price—5.00)) 1.00 Nasdaq proposes an amendment to NASD Rule 11890 to clarify that the minimum price deviation thresholds are applicable only to transactions executed during regular market hours, i.e., between 9:30 a.m. and 4:00 p.m. According to Nasdaq, this amendment reflects the fact that the analysis conducted by Nasdaq to determine the appropriate levels for the thresholds was based on pricing during normal market hours, and that therefore application of the thresholds during other trading sessions is not consistent with the intent underlying the rule. Nasdaq believes that, during pre-market and post-market trading sessions, the inside price of many stocks may not fully reflect trading interest in the stock, since the range of market participants in these trading sessions is far more limited than during regular market hours. As a result, a trade that occurs at a price that deviates significantly from 6 Securities Exchange Act Release No. 52141 (July 27, 2005), 70 FR 44709 (August 3, 2005) (SR-NASD– 2004–009). VerDate Aug<31>2005 18:27 Oct 06, 2005 Jkt 208001 a stock’s trading range during the most recent regular market session may nevertheless be sufficiently close to the pre-market or post-market inside price that it would not meet the minimum deviation threshold for the stock. Because the thresholds established by Nasdaq were based on analysis of trading patterns during regular market hours, Nasdaq believes that the rule should be clarified by limiting the thresholds’ application to such hours. Nasdaq believes the change would result in a larger number of transactions being eligible for review under NASD Rule 11890, since transactions occurring during pre-market and post-market sessions would always be eligible for adjudication under the rule unless the market participant seeking an adjudication failed to provide the information required under NASD Rule 11890(a)(2)(B) (i.e., the approximate time of transaction(s), security symbol, number of shares, price(s), contra broker(s) if the transactions are not anonymous, Nasdaq system used to execute the transactions, and the reason the review is being sought). 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 15A of the Act,7 in general and with Section 15A(b)(6) of the Act,8 in particular, in that the proposal is 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. Nasdaq believes that the proposed rule change would ensure that NASD Rule 11890’s minimum price deviation thresholds do not bar adjudication of clearly erroneous petitions in circumstances where the wider spreads prevailing in pre-market and postmarket trading may make the application of such thresholds excessively restrictive. 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 7 15 8 15 PO 00000 U.S.C. 78o–3. U.S.C. 78o–3(b)(6). Frm 00102 Fmt 4703 Sfmt 4703 58763 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 The foregoing proposed rule change is subject to Section 19(b)(3)(A)(iii) of the Act9 and Rule 19b–4(f)(6) thereunder10 because the proposal: (i) Does not significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) does not become operative prior to 30 days after the date of filing or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; provided that the selfregulatory organization has given the Commission notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. Nasdaq has requested that the Commission waive the 30-day operative delay. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because such waiver would make immediately eligible for adjudication clearly erroneous petitions in circumstances where the wider spreads prevailing in pre-market and postmarket trading otherwise may make the application of NASD Rule 11890’s minimum price deviation thresholds overly restrictive. For these reasons, the Commission designates the proposal to be effective upon filing with the Commission.11 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, 9 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 11 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 10 17 E:\FR\FM\07OCN1.SGM 07OCN1 58764 Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / Notices or otherwise in furtherance of the purposes of the Act.12 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: • 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–NASD–2005–115 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–9303. All submissions should refer to File Number SR–NASD–2005–115. 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 such filing also will be available for inspection and copying at the principal office of the 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–2005–115 and should be submitted on or before October 28, 2005. 12 See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C). 18:27 Oct 06, 2005 BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52544; File No. SR–NASD– 2005–030] Electronic Comments VerDate Aug<31>2005 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.13 Jonathan G. Katz, Secretary. [FR Doc. E5–5533 Filed 10–6–05; 8:45 am] Jkt 208001 Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change and Amendment No. 1 Thereto and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 2 to the Proposed Rule Change Relating to the Proposed Uniform Branch Office Registration Form (‘‘Form BR’’) and Amendments to the Uniform Application for Securities Industry Registration or Transfer (‘‘Form U4’’) and the Uniform Termination Notice for Securities Industry Registration (‘‘Form U5’’) September 30, 2005. I. Introduction On March 11, 2005, the National Association of Securities Dealers, Inc. (‘‘NASD’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘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 the Uniform Branch Office Registration Form (‘‘Form BR’’) 3 and to make conforming changes to the Uniform Application for Securities Industry Registration or Transfer (‘‘Form U4’’) and the Uniform Termination Notice for Securities Industry Registration (‘‘Form U5’’). On May 12, 2005, NASD amended the proposed rule change (‘‘Amendment No. 1’’). The proposed rule change, as amended by Amendment No. 1, was published for comment in the Federal 13 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 At the request of the NASD, the Commission staff has made corrections to the title of the Form BR, which was inadvertently shown in the initial filing and Amendment No. 2 to the filing, see infra note 7, as ‘‘Uniform Branch Office Form.’’ Telephone conversation between Richard Pullano, Associate Vice President/Chief Counsel, Registration and Disclosure, NASD, Elizabeth Badawy, Accountant, Division of Market Regulation (‘‘Division’’), Commission, and Kate Robbins, Attorney, Division, Commission, on September 20, 2005. 1 15 PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 Register on June 2, 2005.4 The Commission received six comment letters on the proposal, as amended.5 On August 17, 2005, NASD submitted a response to the comment letters.6 On August 18, 2005, NASD amended the proposed rule change (‘‘Amendment No. 2’’).7 This order approves the proposed rule change, as amended by Amendment No. 1; grants accelerated approval to Amendment No. 2; and solicits comments from interested persons on Amendment No. 2. II. Description of Proposed Rule Change NASD proposes to establish Form BR, a uniform branch office registration form developed by a working group composed of representatives from NASD, the New York Stock Exchange, Inc. (‘‘NYSE’’), the North American Securities Administrators Association (‘‘NASAA’’) and various states (hereinafter referred to as the ‘‘Working Group’’).8 The proposed Form BR would enable firms to register branch offices electronically with NASD, the NYSE, other self-regulatory organizations (‘‘SROs’’), and states, as applicable, through a single filing with the Central Registration Depository (‘‘CRD,’’ the ‘‘CRD system,’’ or ‘‘Web CRD’’). In addition, the proposed Form BR eliminates the need for Schedule E of 4 See Securities Exchange Act Release No. 51742 (May 25, 2005), 70 FR 32386. See also Correction, 70 FR 48802 (August 19, 2005) (including language inadvertently omitted from the first sentence of footnote 3). 5 See letters from Mario DiTrapani, President, Association of Registration Management, dated June 22, 2005 (‘‘ARM Letter’’); Michael Pagano, Chief Compliance Officer, 1st Global, dated June 23, 2005 (‘‘1st Global Letter’’); Sandra T. Masek Ray, CRCP, Executive Vice President/Chief Compliance Officer, Rhodes Securities, Inc., dated June 23, 2005 (‘‘Rhodes Letter’’); Robert S. Rosenthal, Vice President & Chief Legal Officer, MML Investors Services, Inc., dated June 23, 2005 (‘‘MML Letter’’); Franklin L. Widmann, President and Chief, New Jersey Bureau of Securities, North American Securities Administrators Association, Inc., dated July 12, 2005 (‘‘NASAA Letter’’); and Carl B. Wilkerson, Vice President & Chief Counsel, Securities & Litigation, American Council of Life Insurers, dated June 23, 2005 (‘‘ACLI Letter’’). In addition, the Commission received a comment letter on SR–NASD–2005–012, a filing dealing with the same substance but that had been rejected by the Commission. The letter raised a number of technical concerns which have been addressed by the NASD or will be addressed during the implementation phase for Form BR. 6 See letter from Shirley H. Weiss, Associate General Counsel, NASD, to Katherine A. England, Assistant Director, Division, Commission, dated August 17, 2005 (‘‘NASD Response Letter’’). 7 See discussion of Amendment No. 2 in Section II, Description of Proposed Rule Change, infra. 8 The NYSE also filed a proposed rule change to adopt the Form BR, which is substantially similar to NASD’s proposal. The Commission is simultaneously approving the NYSE’s proposed rule change. See Securities Exchange Act Release No. 52543 (September 30, 2005) (SR–NYSE–2005– 13). E:\FR\FM\07OCN1.SGM 07OCN1

Agencies

[Federal Register Volume 70, Number 194 (Friday, October 7, 2005)]
[Notices]
[Pages 58762-58764]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-5533]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52549; File No. SR-NASD-2005-115]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Amend NASD Rule 11890

October 3, 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 September 22, 2005, 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'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by Nasdaq. Nasdaq filed the 
proposal as a ``non-controversial'' rule change pursuant to Section 
19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which 
renders the proposal effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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

    Nasdaq proposes to clarify the scope of a recent amendment to NASD 
Rule 11890. Nasdaq proposes to implement the proposed rule change on 
September 26, 2005. Below is the text of the proposed rule change. 
Proposed new language is in italics; proposed deletions are in 
[brackets].\5\
---------------------------------------------------------------------------

    \5\ The proposed rule change is marked to show changes from the 
rule as it appears in the electronic NASD Manual available at http:/
/www.nasd.com.
---------------------------------------------------------------------------

* * * * *

11890. Clearly Erroneous Transactions

(a) Authority to Review Transactions Pursuant to Complaint of Market 
Participant
    (1) No change.
(2) Procedures for Reviewing Transactions
    (A)-(B) No change.
    (C) Following the expiration of the period for submission of 
supporting material, a Nasdaq officer shall determine whether the 
complaint is eligible for review. A complaint shall not be eligible for 
review under paragraph (a) unless:
    (i) the complainant has provided all of the supporting information 
required under paragraph (a)(2)(B), and
    (ii) For trades executed between 9:30 a.m. and 4:00 p.m. Eastern 
Time, [T]the price of transaction to buy (sell) that is the subject of 
the complaint is greater than (less than) the best offer (best bid) by 
an amount that equals or exceeds the minimum threshold set forth below:

------------------------------------------------------------------------
               Inside price                       Minimum threshold
------------------------------------------------------------------------
$0-0.99...................................  $0.02 + (0.10 x Inside
                                             Price)
1.00-4.99.................................  0.12 + (0.07 x (Inside Price-
                                             1.00))
5.00-14.99................................  0.40 + (0.06 x (Inside
                                             Price--5.00))
15 or more................................  1.00
------------------------------------------------------------------------

    For a transaction to buy (sell) a Nasdaq listed security, the 
inside price shall be the best offer (best bid) in Nasdaq at the time 
that the first share of the order that resulted in the disputed 
transaction was executed, and for a transaction to buy (sell) an 
exchange-listed security, the inside price shall be the national best 
offer (best bid) at the time that the first share of the order that 
resulted in the disputed transaction was executed.
    (D)-(G) No change.
    (b) No change.
* * * * *

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.

[[Page 58763]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASD Rule 11890(a) allows designated officers of Nasdaq to declare 
transactions that arise out of the use or operation of Nasdaq execution 
or communications systems to be clearly erroneous and to nullify or 
modify the terms of such transactions. In SR-NASD-2004-009,\6\ Nasdaq 
established a minimum price deviation threshold to provide a ``bright 
line'' rule standard for determining when transactions are considered 
eligible for review. A transaction price that meets these thresholds 
does not automatically trigger a clearly erroneous determination, but 
if the transaction price does not meet these thresholds the transaction 
will not be considered for clearly erroneous review. Thus, there is now 
a conclusive presumption that a transaction to buy (sell) is not 
clearly erroneous unless its price is greater than (less than) the best 
offer (best bid) by an amount that equals or exceeds the minimum 
threshold set forth below:
---------------------------------------------------------------------------

    \6\ Securities Exchange Act Release No. 52141 (July 27, 2005), 
70 FR 44709 (August 3, 2005) (SR-NASD-2004-009).

------------------------------------------------------------------------
               Inside price                       Minimum threshold
------------------------------------------------------------------------
$0-$.99...................................  $0.02 + (0.10 x Inside
                                             Price)
1.00-4.99.................................  0.12 + (0.07 x (Inside
                                             Price--1.00))
5.00-14.99................................  $0.40 + (0.06 x (Inside
                                             Price--5.00))
15 or more................................  1.00
------------------------------------------------------------------------

    Nasdaq proposes an amendment to NASD Rule 11890 to clarify that the 
minimum price deviation thresholds are applicable only to transactions 
executed during regular market hours, i.e., between 9:30 a.m. and 4:00 
p.m. According to Nasdaq, this amendment reflects the fact that the 
analysis conducted by Nasdaq to determine the appropriate levels for 
the thresholds was based on pricing during normal market hours, and 
that therefore application of the thresholds during other trading 
sessions is not consistent with the intent underlying the rule. Nasdaq 
believes that, during pre-market and post-market trading sessions, the 
inside price of many stocks may not fully reflect trading interest in 
the stock, since the range of market participants in these trading 
sessions is far more limited than during regular market hours. As a 
result, a trade that occurs at a price that deviates significantly from 
a stock's trading range during the most recent regular market session 
may nevertheless be sufficiently close to the pre-market or post-market 
inside price that it would not meet the minimum deviation threshold for 
the stock. Because the thresholds established by Nasdaq were based on 
analysis of trading patterns during regular market hours, Nasdaq 
believes that the rule should be clarified by limiting the thresholds' 
application to such hours. Nasdaq believes the change would result in a 
larger number of transactions being eligible for review under NASD Rule 
11890, since transactions occurring during pre-market and post-market 
sessions would always be eligible for adjudication under the rule 
unless the market participant seeking an adjudication failed to provide 
the information required under NASD Rule 11890(a)(2)(B) (i.e., the 
approximate time of transaction(s), security symbol, number of shares, 
price(s), contra broker(s) if the transactions are not anonymous, 
Nasdaq system used to execute the transactions, and the reason the 
review is being sought).
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\7\ in general and with 
Section 15A(b)(6) of the Act,\8\ in particular, in that the proposal is 
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. Nasdaq 
believes that the proposed rule change would ensure that NASD Rule 
11890's minimum price deviation thresholds do not bar adjudication of 
clearly erroneous petitions in circumstances where the wider spreads 
prevailing in pre-market and post-market trading may make the 
application of such thresholds excessively restrictive.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78o-3.
    \8\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

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.

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 proposed rule change is subject to Section 
19(b)(3)(A)(iii) of the Act\9\ and Rule 19b-4(f)(6) thereunder\10\ 
because the proposal: (i) Does not significantly affect the protection 
of investors or the public interest; (ii) does not impose any 
significant burden on competition; and (iii) does not become operative 
prior to 30 days after the date of filing or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest; provided that the self-regulatory organization 
has given the Commission notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    Nasdaq has requested that the Commission waive the 30-day operative 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because such waiver would make immediately eligible for adjudication 
clearly erroneous petitions in circumstances where the wider spreads 
prevailing in pre-market and post-market trading otherwise may make the 
application of NASD Rule 11890's minimum price deviation thresholds 
overly restrictive. For these reasons, the Commission designates the 
proposal to be effective upon filing with the Commission.\11\
---------------------------------------------------------------------------

    \11\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    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,

[[Page 58764]]

or otherwise in furtherance of the purposes of the Act.\12\
---------------------------------------------------------------------------

    \12\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

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-2005-115 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NASD-2005-115. 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 such 
filing also will be available for inspection and copying at the 
principal office of the 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-2005-115 and should be submitted on or before 
October 28, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-5533 Filed 10-6-05; 8:45 am]
BILLING CODE 8010-01-P
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