Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish a Mechanism for Handling Sub-Penny Orders in Securities Listed on the New York Stock Exchange or the American Stock Exchange, 6300-6302 [E6-1614]

Download as PDF 6300 Federal Register / Vol. 71, No. 25 / Tuesday, February 7, 2006 / Notices in NMS stocks that are listed on Nasdaq—priced below $1.00 in increments as small as $0.0001 is consistent with Rule 612(b) and raises no new regulatory issues. 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, 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: erjones on PROD1PC68 with NOTICES 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–CHX–2006–01 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–CHX–2006–01. 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 will also be available for inspection and copying at the principal office of the CHX. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You VerDate Aug<31>2005 15:23 Feb 06, 2006 Jkt 208001 should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CHX–2006–01 and should be submitted on or before February 28, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.17 Nancy M. Morris, Secretary. [FR Doc. E6–1616 Filed 2–6–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53203; File No. SR–NASD– 2006–016] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish a Mechanism for Handling Sub-Penny Orders in Securities Listed on the New York Stock Exchange or the American Stock Exchange January 31, 2006. 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 January 31, 2006, 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 this proposal pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b– 4(f)(6) thereunder,4 which renders the proposed rule change effective immediately upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to establish a mechanism for handling sub-penny orders in securities listed on the New York Stock Exchange (‘‘NYSE’’) or the American Stock Exchange (‘‘Amex’’) due to readiness issues at those two 17 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). 1 15 PO 00000 Frm 00052 Fmt 4703 Sfmt 4703 exchanges and to make another minor adjustment in the related rule language. The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in [brackets].5 * * * * * 6330. Obligations of CQS Market Makers (a) through (c) No change (d) Minimum Price Variation (1) No change (2) [When a quotation properly (not in violation of paragraph (1) above) priced in an increment of less than $0.01 is routed for execution via the ITS System to a market that does not accept quotations in increments of less than $0.01, such a quotation is rounded down (for bids) or up (for offers) to the nearest $0.01 increment.] A quotation for a security listed on the New York Stock Exchange or the American Stock Exchange and properly (not in violation of paragraph (1) above) priced in an increment of less than $0.01 will be adjusted by the Nasdaq Market Center down (for bids) or up (for offers) to the nearest $0.01 increment prior to display, execution or routing. A quotation so adjusted will have no price priority over equivalent quotations that did not require adjustment under this paragraph. * * * * * 4962. Minimum Quotation Increment The minimum quotation increment in the INET System for quotations of $1.00 or above in Nasdaq-listed securities and in securities listed on a national securities exchange shall be $0.01. The minimum quotation increment in the INET System for quotations below $1.00 in Nasdaq-listed securities and in securities listed on a national securities exchange shall be $0.0001. However, if the Securities and Exchange Commission (‘‘SEC’’) permits, with respect to any security, the display, rank or acceptance of quotations priced at or above $1.00 per share in an increment smaller than $0.01, then the minimum quotation increment for such a security shall be the minimum permitted by the SEC or $0.0001, whichever is greater. * * * * * 5 Changes are marked to the rule text that appears in the electronic NASD Manual found at www.nasd.com. Prior to the date when The NASDAQ Stock Market LLC (‘‘NASDAQ LLC’’) commences operations, NASDAQ LLC will file a conforming change to the rules of NASDAQ LLC approved in Securities Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006). E:\FR\FM\07FEN1.SGM 07FEN1 Federal Register / Vol. 71, No. 25 / Tuesday, February 7, 2006 / Notices II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change erjones on PROD1PC68 with NOTICES 1. Purpose On December 22, 2005, Nasdaq filed with the Commission a rule change 6 to align Nasdaq’s rules on minimum pricing increments with Rule 612 of the Commission’s Regulation NMS.7 Consistent with Rule 612, the Nasdaq Market Center (‘‘NMC’’) and Nasdaq’s BRUT and INET facilities now accept quotes that are in increments ofleast $0.0001 if these quotes are priced below $1.00 or if they are in securities exempted by the Commission under Rule 612.8 Quotes priced above $1.00 will be accepted by the NMC, BRUT, and INET in increments of at least $0.01 (unless they are in securities exempted by the Commission). These principles apply equally to Nasdaq-listed securities and to securities listed on other exchanges. Under the present proposal, which is being made to accommodate the NYSE and the Amex, the NMC will adjust all proper (i.e., priced under $1.00 and in increments of not less than $0.0001) sub-penny quotes in NYSE- and Amexlisted securities as soon as it receives them. Offers will be adjusted upwards to the next whole cent, while bids will be adjusted downward to the next whole cent. Sub-penny quotes that are adjusted in this manner will be displayed, executed, or routed, as otherwise applicable, at the adjusted 6 See Securities Exchange Act Release No. 53017 (December 22, 2005), 70 FR 77225 (December 29, 2005). The rule change was effective immediately upon filing, but not operational until January 31, 2006. 7 17 CFR 242.612. 8 The present proposed rule change clarifies with respect to INET that the minimum pricing increment will, in fact, be $0.0001, as opposed to $0.001. This filing also includes an additional conforming change to the INET rules, to clarify that any security that receives the Commission’s permission for sub-penny quoting above $1.00 will be eligible for such quoting on INET. VerDate Aug<31>2005 15:23 Feb 06, 2006 Jkt 208001 price and will not be accorded any price priority over the equivalent unadjusted whole-cent quotes. The NMC will adjust all sub-penny quotes that it receives for NYSE and Amex securities, regardless of whether such quotes are entered into the NMC directly or routed from another trading venue (including when the quotes are routed to the NMC from Nasdaq’s BRUT or INET facilities). The ability of the NMC, BRUT, or INET to accept sub-penny quotes in Nasdaq-, NYSE-, or Amex-listed securities is not affected by this proposal. However, the ‘‘accepted’’ subpenny quotes for NYSE-or Amex-listed stocks will be adjusted before being displayed in the NMC or routed via the ITS linkage from the NMC to the NYSE or the Amex. Nasdaq views the proposal described above as temporary because it will, in most cases, deprive investors of the ability, envisioned in Rule 612, to trade in sub-pennies those NYSE and Amex listed stocks that are priced below $1.00. When Nasdaq determines that this approach is no longer appropriate, it will change the rule described herein by making an immediately effective filing with the Commission. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 15A of the Act,9 in general, and with Section 15A(b)(6) of the Act,10 in particular, in that it is designed to promote just and equitable principles of trade and to remove impediments to, and perfect the mechanism of, a free and open market. 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 Because the proposed rule change: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and 9 15 U.S.C. 78o–3. U.S.C. 78o–3(b)(6). 10 15 PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 6301 (3) does not become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and Rule 19b– 4(f)(6) thereunder.12 The Commission hereby waives the 30-day operative delay.13 The Commission has previously determined that, for NMS stocks, quoting below $1.00 in sub– penny increments should be permitted and codified that view in Rule 612(b) of Regulation NMS.14 The proposed rule change to clarify that the minimum pricing increment for INET will be $0.0001 is consistent with Rule 612(b) and raises no new regulatory issues. With regard to the Exchange’s proposal to round away all proper sub–penny quotes in NYSE- and Amex-listed securities immediately upon receipt by the NMC, the Commission believes that such rounding is non-controversial, as Rule 612 does not require that accepted sub–penny quotes priced below $1.00 be displayed, executed, or routed in sub–pennies. Therefore, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. 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, 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, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: 11 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). Pursuant to Rule 19b– 4(f)(6)(iii) under the Act, the Exchange is required to give the Commission written 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. The Commission has determined to waive this requirement. 13 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 14 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37555 (June 29, 2005). 12 17 E:\FR\FM\07FEN1.SGM 07FEN1 6302 Federal Register / Vol. 71, No. 25 / Tuesday, February 7, 2006 / Notices 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–NASD–2006–016 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53192; File No. SR–NASD– 2006–004] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend Pilot Programs Relating to Multiple Market Participant Identifiers January 30, 2006. 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 January All submissions should refer to File 12, 2006, the National Association of Number SR–NASD–2006–016. This file Securities Dealers, Inc. (‘‘NASD’’), number should be included on the through its subsidiary, The Nasdaq subject line if e-mail is used. To help the Stock Market, Inc. (‘‘Nasdaq’’), filed Commission process and review your with the Securities and Exchange comments more efficiently, please use Commission (‘‘Commission’’) the only one method. The Commission will proposed rule change as described in post all comments on the Commission’s Items I and II below, which Items have Internet Web site (https://www.sec.gov/ been prepared by Nasdaq. Nasdaq has rules/sro.shtml). Copies of the filed the proposal as a ‘‘nonsubmission, all subsequent controversial’’ rule change pursuant to section 19(b)(3)(A) of the Act,3 and Rule amendments, all written statements 19b–4(f)(6) thereunder,4 which renders with respect to the proposed rule the proposal effective upon filing with change that are filed with the the Commission.5 The Commission is Commission, and all written publishing this notice to solicit communications relating to the comments on the proposed rule change proposed rule change between the Commission and any person, other than from interested persons. those that may be withheld from the I. Self-Regulatory Organization’s public in accordance with the Statement of the Terms of Substance of provisions of 5 U.S.C. 552, will be the Proposed Rule Change available for inspection and copying in Nasdaq proposes to continue two the Commission’s Public Reference pilot programs that provide market Room. Copies of such filing also will be participants who execute transactions in available for inspection and copying at Nasdaq and exchange-listed securities the principal office of the NASD. All through its systems the ability to display comments received will be posted trading interest using up to 10 without change; the Commission does individual Market Participant Identifiers not edit personal identifying (‘‘MPIDs’’). The text of the proposed information from submissions. You rule change is available at NASD, the should submit only information that NASD Web site, and at the Commission. you wish to make available publicly. All II. Self-Regulatory Organization’s submissions should refer to File Statement of the Purpose of, and Number SR–NASD–2006–016 and Statutory Basis for, the Proposed Rule should be submitted on or before Change February 28, 2006. In its filing with the Commission, For the Commission, by the Division of Nasdaq included statements concerning Market Regulation, pursuant to delegated the purpose of and basis for the authority.15 proposed rule change and discussed any Nancy M. Morris, comments it received on the proposed rule change. The text of these statements Secretary. [FR Doc. E6–1614 Filed 2–6–06; 8:45 am] 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 5 Nasdaq asked the Commission to waive the fiveday pre-filing notice requirement and the 30-day operative delay. See Rule 19b–4(f)(6)(iii). 17 CFR 240.19b–4(f)(6)(iii). erjones on PROD1PC68 with NOTICES BILLING CODE 8010–01–P 15 17 2 17 CFR 200.30–3(a)(12). VerDate Aug<31>2005 15:23 Feb 06, 2006 Jkt 208001 PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose As set forth in more detail below, Nasdaq is proposing to re-establish two pilot programs that inadvertently were permitted to lapse on December 1, 2005. On March 1, 2004, Nasdaq filed SR– NASD–2004–037 6 with the Commission, establishing the ability of ECNs and market makers in Nasdaq securities to use up to 10 individual MPIDs to display attributable quotes and orders in the Nasdaq Quotation Montage. On July 29, 2004, Nasdaq filed SR–NASD–2004–097 7 with the Commission, which created this same capability for ECNs and market makers using Nasdaq systems to quote and trade exchange-listed securities. MPIDs for Nasdaq and exchange-listed securities are allocated and, when Nasdaq is reaching technological limits for displayed, attributable MPIDs, reallocated using the same procedures.8 Additional MPIDs are known as a ‘‘Supplemental MPID’’ with a market maker’s or ECN’s first MPID being known as the ‘‘Primary MPID.’’ Nasdaq subsequently filed SR–NASD–2004– 134 9 with the Commission, which extended both pilots through March 1, 2005, and SR–NASD–2005–069,10 which extended the pilots through November 30, 2005. Nasdaq is proposing to re-establish the pilot programs through November 30, 2006. 6 Securities Exchange Act Release No. 49471 (March 25, 2004), 69 FR 17006 (March 31, 2004). 7 Securities Exchange Act Release No. 50140 (August 3, 2004), 69 FR 48535 (August 10, 2004). 8 Under those procedures, rankings are based only on the volume associated with a member’s Supplemental MPID—Primary MPIDs will be excluded from the calculation. The member with lowest volume using a Supplemental MPID will continue to be the first to lose the display privilege, but only with respect to the Supplemental MPID that caused it to have the lowest ranking; the member will not lose its authority to use the Supplemental MPID in that security to submit quotes and orders to SIZE or the display privileges associated with that Supplemental MPID with respect to other securities in which it is permitted to use the identifier. When reallocating the display privileges, requests for Primary MPIDs will continue to receive precedence over requests for Supplemental MPIDs. 9 Securities Exchange Act Release No. 50434 (September 23, 2004), 69 FR 58564 (September 30, 2004). 10 Securities Exchange Act Release No. 51810 (June 9, 2005), 70 FR 34803 (June 15, 2005). E:\FR\FM\07FEN1.SGM 07FEN1

Agencies

[Federal Register Volume 71, Number 25 (Tuesday, February 7, 2006)]
[Notices]
[Pages 6300-6302]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-1614]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53203; File No. SR-NASD-2006-016]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Establish a Mechanism for Handling Sub-Penny Orders in 
Securities Listed on the New York Stock Exchange or the American Stock 
Exchange

 January 31, 2006.
    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 January 31, 2006, 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 this 
proposal pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders the proposed rule change effective 
immediately 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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to establish a mechanism for handling sub-penny 
orders in securities listed on the New York Stock Exchange (``NYSE'') 
or the American Stock Exchange (``Amex'') due to readiness issues at 
those two exchanges and to make another minor adjustment in the related 
rule language. The text of the proposed rule change is below. Proposed 
new language is in italics; proposed deletions are in [brackets].\5\
---------------------------------------------------------------------------

    \5\ Changes are marked to the rule text that appears in the 
electronic NASD Manual found at www.nasd.com. Prior to the date when 
The NASDAQ Stock Market LLC (``NASDAQ LLC'') commences operations, 
NASDAQ LLC will file a conforming change to the rules of NASDAQ LLC 
approved in Securities Exchange Act Release No. 53128 (January 13, 
2006), 71 FR 3550 (January 23, 2006).
---------------------------------------------------------------------------

* * * * *

6330. Obligations of CQS Market Makers

    (a) through (c) No change
    (d) Minimum Price Variation
    (1) No change
    (2) [When a quotation properly (not in violation of paragraph (1) 
above) priced in an increment of less than $0.01 is routed for 
execution via the ITS System to a market that does not accept 
quotations in increments of less than $0.01, such a quotation is 
rounded down (for bids) or up (for offers) to the nearest $0.01 
increment.] A quotation for a security listed on the New York Stock 
Exchange or the American Stock Exchange and properly (not in violation 
of paragraph (1) above) priced in an increment of less than $0.01 will 
be adjusted by the Nasdaq Market Center down (for bids) or up (for 
offers) to the nearest $0.01 increment prior to display, execution or 
routing. A quotation so adjusted will have no price priority over 
equivalent quotations that did not require adjustment under this 
paragraph.
* * * * *

4962. Minimum Quotation Increment

    The minimum quotation increment in the INET System for quotations 
of $1.00 or above in Nasdaq-listed securities and in securities listed 
on a national securities exchange shall be $0.01. The minimum quotation 
increment in the INET System for quotations below $1.00 in Nasdaq-
listed securities and in securities listed on a national securities 
exchange shall be $0.0001. However, if the Securities and Exchange 
Commission (``SEC'') permits, with respect to any security, the 
display, rank or acceptance of quotations priced at or above $1.00 per 
share in an increment smaller than $0.01, then the minimum quotation 
increment for such a security shall be the minimum permitted by the SEC 
or $0.0001, whichever is greater.
* * * * *

[[Page 6301]]

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

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

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

1. Purpose
    On December 22, 2005, Nasdaq filed with the Commission a rule 
change \6\ to align Nasdaq's rules on minimum pricing increments with 
Rule 612 of the Commission's Regulation NMS.\7\ Consistent with Rule 
612, the Nasdaq Market Center (``NMC'') and Nasdaq's BRUT and INET 
facilities now accept quotes that are in increments ofleast $0.0001 if 
these quotes are priced below $1.00 or if they are in securities 
exempted by the Commission under Rule 612.\8\ Quotes priced above $1.00 
will be accepted by the NMC, BRUT, and INET in increments of at least 
$0.01 (unless they are in securities exempted by the Commission). These 
principles apply equally to Nasdaq-listed securities and to securities 
listed on other exchanges.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 53017 (December 22, 
2005), 70 FR 77225 (December 29, 2005). The rule change was 
effective immediately upon filing, but not operational until January 
31, 2006.
    \7\ 17 CFR 242.612.
    \8\ The present proposed rule change clarifies with respect to 
INET that the minimum pricing increment will, in fact, be $0.0001, 
as opposed to $0.001. This filing also includes an additional 
conforming change to the INET rules, to clarify that any security 
that receives the Commission's permission for sub-penny quoting 
above $1.00 will be eligible for such quoting on INET.
---------------------------------------------------------------------------

    Under the present proposal, which is being made to accommodate the 
NYSE and the Amex, the NMC will adjust all proper (i.e., priced under 
$1.00 and in increments of not less than $0.0001) sub-penny quotes in 
NYSE- and Amex-listed securities as soon as it receives them. Offers 
will be adjusted upwards to the next whole cent, while bids will be 
adjusted downward to the next whole cent. Sub-penny quotes that are 
adjusted in this manner will be displayed, executed, or routed, as 
otherwise applicable, at the adjusted price and will not be accorded 
any price priority over the equivalent unadjusted whole-cent quotes. 
The NMC will adjust all sub-penny quotes that it receives for NYSE and 
Amex securities, regardless of whether such quotes are entered into the 
NMC directly or routed from another trading venue (including when the 
quotes are routed to the NMC from Nasdaq's BRUT or INET facilities).
    The ability of the NMC, BRUT, or INET to accept sub-penny quotes in 
Nasdaq-, NYSE-, or Amex-listed securities is not affected by this 
proposal. However, the ``accepted'' sub-penny quotes for NYSE-or Amex-
listed stocks will be adjusted before being displayed in the NMC or 
routed via the ITS linkage from the NMC to the NYSE or the Amex.
    Nasdaq views the proposal described above as temporary because it 
will, in most cases, deprive investors of the ability, envisioned in 
Rule 612, to trade in sub-pennies those NYSE and Amex listed stocks 
that are priced below $1.00. When Nasdaq determines that this approach 
is no longer appropriate, it will change the rule described herein by 
making an immediately effective filing with the Commission.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\9\ in general, and with 
Section 15A(b)(6) of the Act,\10\ in particular, in that it is designed 
to promote just and equitable principles of trade and to remove 
impediments to, and perfect the mechanism of, a free and open market.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78o-3.
    \10\ 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

    Because the proposed rule change: (1) Does not significantly affect 
the protection of investors or the public interest; (2) does not impose 
any significant burden on competition; and (3) does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \11\ and 
Rule 19b-4(f)(6) thereunder.\12\ The Commission hereby waives the 30-
day operative delay.\13\ The Commission has previously determined that, 
for NMS stocks, quoting below $1.00 in sub-penny increments should be 
permitted and codified that view in Rule 612(b) of Regulation NMS.\14\ 
The proposed rule change to clarify that the minimum pricing increment 
for INET will be $0.0001 is consistent with Rule 612(b) and raises no 
new regulatory issues. With regard to the Exchange's proposal to round 
away all proper sub-penny quotes in NYSE- and Amex-listed securities 
immediately upon receipt by the NMC, the Commission believes that such 
rounding is non-controversial, as Rule 612 does not require that 
accepted sub-penny quotes priced below $1.00 be displayed, executed, or 
routed in sub-pennies. Therefore, the Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange is required to give the Commission 
written 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. 
The Commission has determined to waive this requirement.
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \14\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37555 (June 29, 2005).
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    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, 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, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

[[Page 6302]]

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-2006-016 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASD-2006-016. 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-2006-016 and should be submitted on or before 
February 28, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-1614 Filed 2-6-06; 8:45 am]
BILLING CODE 8010-01-P
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