Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving a Proposed Rule Change To Establish Rules Governing the Operation of the INET System, 73810-73811 [05-23946]

Download as PDF 73810 Federal Register / Vol. 70, No. 238 / Tuesday, December 13, 2005 / Notices public broker-dealers may file with the Commission a balance sheet and income statement and may send to their customers a balance sheet certified by an independent public accountant, instead of by a registered public accounting firm, for fiscal years ending before January 1, 2007. By the Commission. Jonathan G. Katz, Secretary. [FR Doc. E5–7264 Filed 12–12–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52902; File No. SR–NASD– 2005–128] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving a Proposed Rule Change To Establish Rules Governing the Operation of the INET System December 7, 2005. I. Introduction On November 1, 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 establish rules governing the operation of the INET ECN (‘‘INET System’’ or ‘‘System’’) and fees for System services. The proposed rule change was published for comment in the Federal Register on November 7, 2005.3 The Commission received no comments on the proposal. This order approves the proposed rule change. II. Description On April 22, 2005, Nasdaq entered into definitive agreements to purchase INET ATS, Inc. (‘‘INET’’), a registered broker-dealer and member of NASD,4 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 52723 (November 2, 2005), 70 FR 67513 (‘‘INET Notice’’). 4 In the INET Notice, Nasdaq stated that, as a member of NASD, INET is, and remains, subject to all NASD Rules applicable to its activities as a broker-dealer. In addition, INET would continue to participate in market surveillance and audit trail programs conducted by Nasdaq, NASD, and other self-regulatory organizations. INET would continue to act as a counter-party to all trades taking place in its system, for anonymity as well as a clearance and settlement purposes. INET would also continue to provide outbound order routing services to other 2 17 VerDate Aug<31>2005 00:22 Dec 13, 2005 Jkt 208001 and operator of the INET System. Once acquired by Nasdaq, the INET System would immediately become a ‘‘facility’’ of a national securities association subject to the standards set forth in Sections 15A 5 and 19(b)(1) 6 of the Act and would be required to operate pursuant to formal system rules approved by the Commission.7 Accordingly, in order to ensure that such rules are in place at the time of closing, Nasdaq proposes to establish rules governing the operation of its INET System. Proposed NASD Rule 4950 Series addresses, among other things, the INET System’s order display and matching function, access standards, order types, time-in-force designations, out-bound order routing, order execution algorithm, clearly erroneous trade procedures, and other system features and standards.8 Proposed NASD Rule 701(w) sets forth the fees applicable to participants, which currently include both NASD members and non-NASD members, in the INET System for order execution services. According to Nasdaq, such fees reflect those currently charged by INET to its participants. This fee schedule would apply for a temporary period of time, not to exceed 60 days after INET becomes a facility of Nasdaq. Under the proposal, Nasdaq would initially operate INET on a platform separate from its Nasdaq Market Center and Brut platforms. For a temporary period of time ending no later than September 30, 2006, the INET System would continue to post its top-of-file quotes through the facilities of the National Stock Exchange (‘‘NSX’’), as it does today, and would remain subject to applicable rules and regulations of the NSX.9 In the INET Notice, Nasdaq also stated that it anticipates that, soon after the formal close of the Nasdaq/INET transaction, it would merge the INET broker-dealer into Nasdaq’s Brut brokerdealer and that Brut, as a single brokerdealer, would operate both trading platforms as separate systems with separate order processing and execution. As such, the New York Stock Exchange, Inc. (‘‘NYSE’’) would continue to serve as the designated examining authority for financial responsibility purposes for Nasdaq’s broker-dealer, which would operate both the Brut and INET trading platforms.10 Ultimately, Nasdaq intends to integrate all of its systems into a single technology platform and also combine all three of its system books into a single integrated book. In the INET Notice, Nasdaq stated that it expects to accomplish this process before the end of the third quarter of 2006. Nasdaq proposes that these rules would be implemented immediately upon formal closing of the Nasdaq/INET transaction, and in no event more than two weeks after Commission approval. In the INET Notice, Nasdaq stated that it will provide to the Commission formal written notice of the closing date of the transaction. Such closing date, which must take place within two weeks of Commission approval, shall be the start date for the calculation of any temporary time period referred to in this filing. Nasdaq also stated that it would thereafter submit rule filings to include such closing date in its rules. III. Discussion After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a selfregulatory organization 11 and, in particular, the requirements of Section 15A of the Act 12 and the rules and regulations thereunder. Specifically, the Commission finds that the proposed rule change is consistent with 15A(b)(6) of the Act,13 in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, remove impediments to a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission notes that the INET System would become a facility of a national securities association subject to the standards set forth in Sections 15A 14 and 19(b)(1) 15 of the Act when Nasdaq completes its purchase of INET. As such, NASD and, pursuant to NASD’s plan of allocation and delegation of function to its subsidiaries, Nasdaq are obligated to file rules governing the operation of the INET System with the Commission. In addition, the Commission notes that, as 10 See INET Notice at 67522. approving this proposed rule change the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 12 15 U.S.C. 78o–3. 13 15 U.S.C. 78o–3(b)(6). 14 15 U.S.C. 78o–3. 15 15 U.S.C. 78s(b)(1). 11 In market centers for its subscribers. See INET Notice at 67518. 5 15 U.S.C. 78o–3. 6 15 U.S.C. 78s(b)91). 7 See INET Notice at 67518. 8 See INET Notice. 9 See INET Notice at 67518. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 E:\FR\FM\13DEN1.SGM 13DEN1 Federal Register / Vol. 70, No. 238 / Tuesday, December 13, 2005 / Notices a broker-dealer, INET remains subject to the applicable NASD rules. The Commission notes that the proposed rule change articulates Nasdaq’s operation of INET and INET’s integration with the Nasdaq Market Center and Brut. The rules that are the subject of this filing encompass a wide range of areas, including the INET System’s order display and matching function, access standards, order types, time-in-force designations, out-bound order routing, order execution algorithm, clearly erroneous trade procedures, other system features and standards, and fees. The Commission believes that the proposed rules are reasonably designed to provide order interaction and price competition. Under the proposed rule change, INET will continue to participate in market surveillance and audit trail programs conducted by Nasdaq and NASD, and, for the temporary period during which it posts its top-of-file quotes through the facilities of the NSX, would also remain subject to all applicable rules and regulations of the NSX. In addition, the Commission notes that many of the proposed trading rules for the INET System are modeled on existing rules that apply to Nasdaq’s Brut facility and the Nasdaq Market Center.16 Accordingly, the Commission believes that granting approval to substantially similar rules for Nasdaq’s INET facility is appropriate because such rules do not raise any novel or significant regulatory issues. The Commission notes that, under this proposal, there is a temporary transition period during which INET would continue to operate in functionally the same manner in which it operates today; thus, the immediate transition to INET’s operation as a 16 See Securities Exchange Act Release No. 51326 (March 7, 2005), 70 FR 12521 (March 14, 2005) (‘‘Brut Approval Order’’). On September 7, 2004, Nasdaq acquired Brut LLC, a registered brokerdealer and member of NASD, and operator of the Brut ECN (‘‘Brut’’). Once purchased by Nasdaq, Brut became a facility of a national securities association. Nasdaq initially operated Brut pursuant to a Temporary Conditional Exemption under Section 36 of the Act, which the Commission granted for a period of six months following Nasdaq’s acquisition of Brut. See Exchange Act Release No. 50311 (September 3, 2004), 69 FR 54818 (September 10, 2004). On November 3, 2004, NASD, through Nasdaq, filed with the Commission a proposed rule change to establish rules governing the operation of its Brut trading facility. The proposed rule change, as amended by Amendment No. 1 thereto, was published for comment in the Federal Register on January 31, 2005. See Securities Exchange Act Release No. 51078 (January 25, 2005), 70 FR 4902 (January 31, 2005) (SR–NASD–2004– 173) (‘‘Brut Notice’’). The Commission received no comments on the Brut Notice, as amended by Amendment Nos. 1 and 2 thereto, and approved the proposed rule change, as amended, on March 7, 2005. See Brut Approval Order. VerDate Aug<31>2005 00:22 Dec 13, 2005 Jkt 208001 Nasdaq facility should be seamless from a market structure perspective for market participants, in general, and INET subscribers, in particular. The Commission also emphasizes that INET, as a Nasdaq facility, will now be subject to Section 19 of the Act 17 and, to the extent that proposed rule changes are required to effectuate the Nasdaq/INET integration as described above, such proposed rule changes must be submitted to, and reviewed by, the Commission. In addition, the Commission notes that several of Nasdaq’s proposed rules would apply for a temporary period, allowing INET to continue certain of its current practices during a limited transition period immediately following the closing of the Nasdaq/INET transaction. For example, INET’s proposed rules relating to the registration of all INET system participants as members of NASD,18 clearly erroneous transactions,19 limitation of liability,20 and system service charges 21 only apply for a period of time not to exceed 60 days after INET becomes a facility of Nasdaq. Likewise, INET’s display of its best priced orders through the facilities of the NSX may continue on a temporary basis until September 30, 2006.22 The Commission notes that this proposal represents an interim step toward Nasdaq’s ultimate plan to unify INET, the Nasdaq Market Center, and Brut into a single technology platform, which Nasdaq has committee to complete before the end of the third quarter of 2006. Finally, the Commission expects that, as Nasdaq has stated, soon after the formal close of the Nasdaq/INET transaction, Nasdaq will merge the INET broker-dealer into Nasdaq’s Brut brokerdealer and that Brut as a single brokerdealer would operate both ECNs as separate systems, with separate order processing and execution, which would permit the NYSE to continue to serve as the designated examining authority for financial responsibility purposes for Nasdaq’s wholly-owned broker-dealer. The Commission believes that this arrangement should held to eliminate actual, or the appearance of any, conflicts of interest between NASD and INET’s broker-dealer operation. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,23 that the proposed rule change (File No. SR– NASD–2005–128) be, and hereby is, approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.24 Jonathan G. Katz, Secretary. [FR Doc. 05–23946 Filed 12–12–05; 8:45 am] BILLING CODE 8010–01–M SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52898; File No. SR–PCX– 2005–87] Self-Regulatory Organizations; The Pacific Exchange, Inc.; Notice of Filing of Proposed Rule Change, and Amendment No. 1 Thereto, Relating to the Tracking Order Process December 6, 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 July 26, 2005, the Pacific Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the PCX. On November 22, 2005, the Exchange submitted 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 The PCX, through its wholly-owned subsidiary PCX Equities, Inc. (‘‘PCXE’’), proposes to amend its rules governing the Archipelago Exchange (‘‘ArcaEx’’), the equities trading facility of PCXE. With this filing, the Exchange proposes to replace the existing PCXE rules describing the current ArcaEx Tracking Order Process 4 with new provisions setting forth a simplified price/time execution priority for the Tracking Order Process. Further, the PCX 23 15 17 15 U.S.C. 78s(b). 18 Proposed NASD Rule 4952. 19 Proposed NASD Rule 4961. 20 Proposed NASD Rule 4964. 21 Proposed NASD Rule 7010(w). 22 Proposed NASD Rule 4954(b)(2). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 73811 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Amendment No.1, which replaced the original filing in its entirety, made technical and clarifying changes to the proposed rule change. 4 See PCXE Rule 7.37(c). 24 17 E:\FR\FM\13DEN1.SGM 13DEN1

Agencies

[Federal Register Volume 70, Number 238 (Tuesday, December 13, 2005)]
[Notices]
[Pages 73810-73811]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-23946]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52902; File No. SR-NASD-2005-128]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving a Proposed Rule Change To Establish 
Rules Governing the Operation of the INET System

December 7, 2005.

I. Introduction

    On November 1, 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 establish rules governing the 
operation of the INET ECN (``INET System'' or ``System'') and fees for 
System services.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    The proposed rule change was published for comment in the Federal 
Register on November 7, 2005.\3\ The Commission received no comments on 
the proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 52723 (November 2, 
2005), 70 FR 67513 (``INET Notice'').
---------------------------------------------------------------------------

II. Description

    On April 22, 2005, Nasdaq entered into definitive agreements to 
purchase INET ATS, Inc. (``INET''), a registered broker-dealer and 
member of NASD,\4\ and operator of the INET System. Once acquired by 
Nasdaq, the INET System would immediately become a ``facility'' of a 
national securities association subject to the standards set forth in 
Sections 15A \5\ and 19(b)(1) \6\ of the Act and would be required to 
operate pursuant to formal system rules approved by the Commission.\7\ 
Accordingly, in order to ensure that such rules are in place at the 
time of closing, Nasdaq proposes to establish rules governing the 
operation of its INET System. Proposed NASD Rule 4950 Series addresses, 
among other things, the INET System's order display and matching 
function, access standards, order types, time-in-force designations, 
out-bound order routing, order execution algorithm, clearly erroneous 
trade procedures, and other system features and standards.\8\ Proposed 
NASD Rule 701(w) sets forth the fees applicable to participants, which 
currently include both NASD members and non-NASD members, in the INET 
System for order execution services. According to Nasdaq, such fees 
reflect those currently charged by INET to its participants. This fee 
schedule would apply for a temporary period of time, not to exceed 60 
days after INET becomes a facility of Nasdaq.
---------------------------------------------------------------------------

    \4\ In the INET Notice, Nasdaq stated that, as a member of NASD, 
INET is, and remains, subject to all NASD Rules applicable to its 
activities as a broker-dealer. In addition, INET would continue to 
participate in market surveillance and audit trail programs 
conducted by Nasdaq, NASD, and other self-regulatory organizations. 
INET would continue to act as a counter-party to all trades taking 
place in its system, for anonymity as well as a clearance and 
settlement purposes. INET would also continue to provide outbound 
order routing services to other market centers for its subscribers. 
See INET Notice at 67518.
    \5\ 15 U.S.C. 78o-3.
    \6\ 15 U.S.C. 78s(b)91).
    \7\ See INET Notice at 67518.
    \8\ See INET Notice.
---------------------------------------------------------------------------

    Under the proposal, Nasdaq would initially operate INET on a 
platform separate from its Nasdaq Market Center and Brut platforms. For 
a temporary period of time ending no later than September 30, 2006, the 
INET System would continue to post its top-of-file quotes through the 
facilities of the National Stock Exchange (``NSX''), as it does today, 
and would remain subject to applicable rules and regulations of the 
NSX.\9\ In the INET Notice, Nasdaq also stated that it anticipates 
that, soon after the formal close of the Nasdaq/INET transaction, it 
would merge the INET broker-dealer into Nasdaq's Brut broker-dealer and 
that Brut, as a single broker-dealer, would operate both trading 
platforms as separate systems with separate order processing and 
execution. As such, the New York Stock Exchange, Inc. (``NYSE'') would 
continue to serve as the designated examining authority for financial 
responsibility purposes for Nasdaq's broker-dealer, which would operate 
both the Brut and INET trading platforms.\10\ Ultimately, Nasdaq 
intends to integrate all of its systems into a single technology 
platform and also combine all three of its system books into a single 
integrated book. In the INET Notice, Nasdaq stated that it expects to 
accomplish this process before the end of the third quarter of 2006.
    Nasdaq proposes that these rules would be implemented immediately 
upon formal closing of the Nasdaq/INET transaction, and in no event 
more than two weeks after Commission approval. In the INET Notice, 
Nasdaq stated that it will provide to the Commission formal written 
notice of the closing date of the transaction. Such closing date, which 
must take place within two weeks of Commission approval, shall be the 
start date for the calculation of any temporary time period referred to 
in this filing. Nasdaq also stated that it would thereafter submit rule 
filings to include such closing date in its rules.
---------------------------------------------------------------------------

    \9\ See INET Notice at 67518.
    \10\ See INET Notice at 67522.
---------------------------------------------------------------------------

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a self-regulatory organization 
\11\ and, in particular, the requirements of Section 15A of the Act 
\12\ and the rules and regulations thereunder. Specifically, the 
Commission finds that the proposed rule change is consistent with 
15A(b)(6) of the Act,\13\ in that it is designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, remove impediments to a free and open market and a 
national market system, and, in general, to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \11\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78o-3.
    \13\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    The Commission notes that the INET System would become a facility 
of a national securities association subject to the standards set forth 
in Sections 15A \14\ and 19(b)(1) \15\ of the Act when Nasdaq completes 
its purchase of INET. As such, NASD and, pursuant to NASD's plan of 
allocation and delegation of function to its subsidiaries, Nasdaq are 
obligated to file rules governing the operation of the INET System with 
the Commission. In addition, the Commission notes that, as

[[Page 73811]]

a broker-dealer, INET remains subject to the applicable NASD rules.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78o-3.
    \15\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    The Commission notes that the proposed rule change articulates 
Nasdaq's operation of INET and INET's integration with the Nasdaq 
Market Center and Brut. The rules that are the subject of this filing 
encompass a wide range of areas, including the INET System's order 
display and matching function, access standards, order types, time-in-
force designations, out-bound order routing, order execution algorithm, 
clearly erroneous trade procedures, other system features and 
standards, and fees. The Commission believes that the proposed rules 
are reasonably designed to provide order interaction and price 
competition. Under the proposed rule change, INET will continue to 
participate in market surveillance and audit trail programs conducted 
by Nasdaq and NASD, and, for the temporary period during which it posts 
its top-of-file quotes through the facilities of the NSX, would also 
remain subject to all applicable rules and regulations of the NSX. In 
addition, the Commission notes that many of the proposed trading rules 
for the INET System are modeled on existing rules that apply to 
Nasdaq's Brut facility and the Nasdaq Market Center.\16\ Accordingly, 
the Commission believes that granting approval to substantially similar 
rules for Nasdaq's INET facility is appropriate because such rules do 
not raise any novel or significant regulatory issues.
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 51326 (March 7, 
2005), 70 FR 12521 (March 14, 2005) (``Brut Approval Order''). On 
September 7, 2004, Nasdaq acquired Brut LLC, a registered broker-
dealer and member of NASD, and operator of the Brut ECN (``Brut''). 
Once purchased by Nasdaq, Brut became a facility of a national 
securities association. Nasdaq initially operated Brut pursuant to a 
Temporary Conditional Exemption under Section 36 of the Act, which 
the Commission granted for a period of six months following Nasdaq's 
acquisition of Brut. See Exchange Act Release No. 50311 (September 
3, 2004), 69 FR 54818 (September 10, 2004). On November 3, 2004, 
NASD, through Nasdaq, filed with the Commission a proposed rule 
change to establish rules governing the operation of its Brut 
trading facility. The proposed rule change, as amended by Amendment 
No. 1 thereto, was published for comment in the Federal Register on 
January 31, 2005. See Securities Exchange Act Release No. 51078 
(January 25, 2005), 70 FR 4902 (January 31, 2005) (SR-NASD-2004-173) 
(``Brut Notice''). The Commission received no comments on the Brut 
Notice, as amended by Amendment Nos. 1 and 2 thereto, and approved 
the proposed rule change, as amended, on March 7, 2005. See Brut 
Approval Order.
---------------------------------------------------------------------------

    The Commission notes that, under this proposal, there is a 
temporary transition period during which INET would continue to operate 
in functionally the same manner in which it operates today; thus, the 
immediate transition to INET's operation as a Nasdaq facility should be 
seamless from a market structure perspective for market participants, 
in general, and INET subscribers, in particular. The Commission also 
emphasizes that INET, as a Nasdaq facility, will now be subject to 
Section 19 of the Act \17\ and, to the extent that proposed rule 
changes are required to effectuate the Nasdaq/INET integration as 
described above, such proposed rule changes must be submitted to, and 
reviewed by, the Commission.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

    In addition, the Commission notes that several of Nasdaq's proposed 
rules would apply for a temporary period, allowing INET to continue 
certain of its current practices during a limited transition period 
immediately following the closing of the Nasdaq/INET transaction. For 
example, INET's proposed rules relating to the registration of all INET 
system participants as members of NASD,\18\ clearly erroneous 
transactions,\19\ limitation of liability,\20\ and system service 
charges \21\ only apply for a period of time not to exceed 60 days 
after INET becomes a facility of Nasdaq. Likewise, INET's display of 
its best priced orders through the facilities of the NSX may continue 
on a temporary basis until September 30, 2006.\22\ The Commission notes 
that this proposal represents an interim step toward Nasdaq's ultimate 
plan to unify INET, the Nasdaq Market Center, and Brut into a single 
technology platform, which Nasdaq has committee to complete before the 
end of the third quarter of 2006. Finally, the Commission expects that, 
as Nasdaq has stated, soon after the formal close of the Nasdaq/INET 
transaction, Nasdaq will merge the INET broker-dealer into Nasdaq's 
Brut broker-dealer and that Brut as a single broker-dealer would 
operate both ECNs as separate systems, with separate order processing 
and execution, which would permit the NYSE to continue to serve as the 
designated examining authority for financial responsibility purposes 
for Nasdaq's wholly-owned broker-dealer. The Commission believes that 
this arrangement should held to eliminate actual, or the appearance of 
any, conflicts of interest between NASD and INET's broker-dealer 
operation.
---------------------------------------------------------------------------

    \18\ Proposed NASD Rule 4952.
    \19\ Proposed NASD Rule 4961.
    \20\ Proposed NASD Rule 4964.
    \21\ Proposed NASD Rule 7010(w).
    \22\ Proposed NASD Rule 4954(b)(2).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (File No. SR-NASD-2005-128) be, 
and hereby is, approved.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
[FR Doc. 05-23946 Filed 12-12-05; 8:45 am]
BILLING CODE 8010-01-M
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