Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Extending the Pilot Relating To Manning Price-Improvement Standards for Decimalized Securities, 35315-35317 [E6-9530]
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Federal Register / Vol. 71, No. 117 / Monday, June 19, 2006 / Notices
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Nancy M. Morris,
Secretary.
[FR Doc. E6–9579 Filed 6–16–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53976; File No. SR-CBOE–
2006–39]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Approving a
Proposed Rule Change Regarding the
e-DPM Membership Ownership
Requirement
June 12, 2006.
jlentini on PROD1PC65 with NOTICES
On April 20, 2006, the Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’ or ‘‘Exchange’’) 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
clarify the membership ownership
requirements for e-DPMs set forth in
CBOE Rule 8.92(d). Specifically, the
proposal clarifies that a parent company
of an e-DPM entity may own or lease the
required memberships on behalf of the
e-DPM entity provided such
memberships are dedicated solely to the
e-DPM organization’s e-DPM activity.
The proposed rule change was
published for comment in the Federal
Register on May 12, 2006.3 The
Commission received no comments on
the proposal.
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 national securities
exchange 4 and, in particular, the
requirements of Section 6 of the Act 5
and the rules and regulations
thereunder. The Commission
specifically finds that the proposed rule
change is consistent with Section 6(b)(5)
of the Act 6 in that it is designed to
promote just and equitable principles of
11 17 CFR 200.30–3(a)(12); 17 CFR 200.30–
3(a)(44).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 53771
(May 8, 2006), 71 FR 27757.
4 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
5 15 U.S.C. 78f.
6 15 U.S.C. 78f(b)(5).
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16:46 Jun 16, 2006
Jkt 208001
trade, to remove impediments and to
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest. The
Commission believes that the proposal
should provide more flexibility to eDPM organizations in satisfying the
membership ownership requirements of
CBOE Rule 8.92.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,7 that the
proposed rule change (SR–CBOE–2006–
39) is approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.8
Nancy M. Morris,
Secretary.
[FR Doc. E6–9577 Filed 6–16–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53972; File No. SR–NASD–
2006–069]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Extending the Pilot
Relating To Manning PriceImprovement Standards for
Decimalized Securities
June 12, 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 June 1,
2006, the National Association of
Securities Dealers, Inc. (‘‘NASD’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by NASD. NASD has
designated the proposal as constituting
a ‘‘non-controversial’’ proposed rule
change under section 19(b)(3)(A) of the
Act 3 and Rule 19b–4(f)(6) thereunder,4
which renders it effective upon filing
with the Commission. The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
7 15
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 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
8 17
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35315
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASD is proposing to extend through
December 31, 2006, the current pilot
price-improvement standards for
decimalized securities contained in
NASD Interpretive Material (‘‘IM’’)
2110–2—Trading Ahead of Customer
Limit Order (‘‘Manning Rule’’). There
are no proposed changes to rule text.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NASD included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. NASD has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NASD’s Manning Rule requires an
NASD member firm to provide a
minimum level of price improvement to
incoming orders in Nasdaq and
exchange-listed securities if the firm
chooses to trade as principal with those
incoming orders at prices equal to or
better than customer limit orders the
firm currently holds.5 If a firm fails to
provide the minimum level of price
improvement to the incoming order, the
firm must execute its held customer
limit orders at the price at which the
firm traded for its own account or better.
Generally, if a firm fails to provide the
requisite amount of price improvement
and also fails to execute its held
5 The Commission recently approved
amendments to the Manning Rule to require
members to provide price improvement to customer
limit orders in certain circumstances and expand
the application of the Manning Rule to exchangelisted securities. See Securities Exchange Act
Release No. 52210 (August 4, 2005), 70 FR 46897
(August 11, 2005) (SR–NASD–2004–089). These
amendments became effective January 2, 2006. See
NASD Notice to Members 05–64.
The Commission also recently approved further
amendments to the Manning Rule to codify NASD’s
existing position that the Manning Rule applies to
all members, whether acting as a market maker or
not. These amendments became effective April 14,
2006. See Securities Exchange Act Release No.
53653 (April 14, 2006), 71 FR 20429 (April 20,
2006) (SR-NASD–2006–035).
E:\FR\FM\19JNN1.SGM
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35316
Federal Register / Vol. 71, No. 117 / Monday, June 19, 2006 / Notices
customer limit orders, it is in violation
of the Manning Rule.
On April 6, 2001,6 the Commission
approved, on a pilot basis, price
improvement standards for decimalized
securities contained in the Manning
Rule, which added the following
language to IM–2110–2:
For Nasdaq securities authorized for
trading in decimals pursuant to the Decimals
Implementation Plan For the Equities and
Options Markets, the minimum amount of
price improvement necessary in order for a
market maker to execute an incoming order
on a proprietary basis in a security trading in
decimals when holding an unexecuted limit
order in that same security, and not be
required to execute the held limit order, is as
follows:
(1) For customer limit orders priced at or
inside the best inside market displayed in
Nasdaq, the minimum amount of price
improvement required is $0.01; and
(2) For customer limit orders priced
outside the best inside market displayed in
Nasdaq, the market maker must price
improve the incoming order by executing the
incoming order at a price at least equal to the
next superior minimum quotation increment
in Nasdaq (currently $0.01).7
jlentini on PROD1PC65 with NOTICES
Since approval, these standards
continue to operate on a pilot basis that
terminates on June 30, 2006.8 NASD has
determined to seek an extension of its
current Manning Rule pilot until
December 31, 2006. NASD believes that
such an extension provides for an
appropriate continuation of the current
Manning Rule price improvement
standards while the Commission
6 See Securities Exchange Act Release No. 44165
(April 6, 2001), 66 FR 19268 (April 13, 2001) (SR–
NASD–2001–27).
7 Pursuant to the terms of the Decimals
Implementation Plan for the Equities and Options
Markets, the minimum quotation increment for
Nasdaq securities at the outset of decimal pricing
is $0.01. On June 9, 2005, the Commission adopted
Rule 612 of Regulation NMS which establishes
minimum pricing increments for NMS stocks (e.g.,
Nasdaq and exchange-listed securities). Rule 612 of
Regulation NMS prohibits market participants from
displaying, ranking, or accepting quotations, orders,
or indications of interest in any NMS stock priced
in an increment smaller than $0.01 if the quotation,
order, or indication of interest is priced equal to or
greater than $1.00 per share. If the quotation, order,
or indication of interest is priced less than $1.00 per
share, the minimum pricing increment is $0.0001.
See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005) (File
No. S7–10–04). Rule 612 of Regulation NMS
became effective on January 31, 2006. See Securities
Exchange Act Release No. 52196 (August 2, 2005),
70 FR 45529 (August 8, 2005).
Given the adoption and implementation of Rule
612 of Regulation NMS, Nasdaq, among other
market centers, implemented changes to its trading
systems to accept, rank, execute and disseminate
priced quotations in accordance with Rule 612 of
Regulation NMS. Quotations submitted to Nasdaq
that are not in compliance with Rule 612 of
Regulation NMS are rejected.
8 See Securities Exchange Act Release No. 53026
(December 27, 2005), 71 FR 377 (January 4, 2006)
(SR–NASD–2005–152).
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16:46 Jun 16, 2006
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continues to analyze the issues related
to customer limit order protection in a
decimalized environment. NASD is not
proposing any other changes to the pilot
at this time. NASD proposes to make the
proposed rule change operative on July
1, 2006.
2. Statutory Basis
NASD believes that the proposed rule
change is consistent with the provisions
of section 15A(b)(6) of the Act,9 which
requires, among other things, that NASD
rules must be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, and, in general, to
protect investors and the public interest.
NASD believes that the proposed rule
change will improve treatment of
customer limit orders and enhance the
integrity of the market.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NASD does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
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 by NASD.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest,
provided that NASD has given the
Commission written notice of its intent
to file 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,10 the proposed rule
9 15
U.S.C. 78o–3(b)(6).
19b–4(f)(6)(iii) under the Act requires that
a self-regulatory organization submit to 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 NASD provided
notice to the Commission four business days prior
to filing the proposed rule change, and the
Commission has determined to waive the five
business day pre-filing notice requirement.
10 Rule
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Frm 00068
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change has become effective pursuant to
section 19(b)(3)(A) of the Act and Rule
19b–4(f)(6) thereunder.
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.11
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASD–2006–069 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–NASD–2006–069. 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 NASD. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
11 See
E:\FR\FM\19JNN1.SGM
15 U.S.C. 78s(b)(3)(C).
19JNN1
Federal Register / Vol. 71, No. 117 / Monday, June 19, 2006 / Notices
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NASD–2006–069 and
should be submitted on or before July
10, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.12
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–9530 Filed 6–16–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53971; File No. SR–
NYSEArca–2006–22]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and Order
Granting Accelerated Approval of a
Proposed Rule Change Relating to
Increasing the Maximum Weighting of
Certain Component Stocks in Indexes
or Portfolios Underlying Investment
Company Units
June 12, 2006.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on May 22, 2006, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by NYSE Arca. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons, and is
approving the proposal on an
accelerated basis.
jlentini on PROD1PC65 with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange, through its wholly
owned subsidiary NYSE Arca Equities,
Inc. (‘‘NYSE Arca Equities’’), proposes
to amend its rules governing NYSE
Arca, L.L.C., the equities trading facility
of NYSE Arca Equities. The Exchange
proposes to amend Commentary
.01(a)(3) to NYSE Arca Equities Rule
5.2(j)(3), to increase from 25 percent to
30 percent the maximum weight of the
most heavily weighted component stock
of an index or portfolio underlying a
series of Investment Company Units
(‘‘ICUs’’).
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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16:46 Jun 16, 2006
Jkt 208001
The text of the proposed rule change
is available on the NYSE Arca Web site
(https://www.nysearca.com), at the
Commission’s Public Reference Room,
and the principal office of NYSE Arca.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NYSE Arca 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 III below. NYSE
Arca 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
NYSE Arca Equities Rule 5.2(j)(3)
provides listing standards for ICUs to
permit listing and trading of these
securities pursuant to Rule 19b–4(e)
under the Exchange Act.3 Rule 19b–4(e)
provides that the listing and trading of
a new derivative securities product by a
self-regulatory organization (‘‘SRO’’)
shall not be deemed a proposed rule
change, pursuant to Rule 19b–4(c)(1)
under the Exchange Act,4 if the
Commission has approved, pursuant to
section 19(b) of the Exchange Act,5 the
SRO’s trading rules, procedures and
listing standards for the product class
that would include the new derivative
securities product, and the SRO has a
surveillance program for the product
class.6 These standards are frequently
referred to as ‘‘generic’’ listing
standards.
In October of 1999, the Commission
approved PCX Equities 7 Rule 5.2(j)(3),
which sets forth the rules related to the
listing and trading criteria for ICUs.8 In
July 2001, the Commission also
approved the Pacific Exchange’s 9
generic listing standards for the listing
3 17
CFR 240.19b–4(e).
CFR 240.19b–4(c)(1).
5 15 U.S.C. 78s(b).
6 See Securities Exchange Act Release No. 40761
(December 8, 1998), 63 FR 70952 (December 22,
1998) (File No. S7–13–98).
7 PCX Equities, Inc. was the predecessor to NYSE
Arca Equities.
8 See Securities Exchange Act Release No. 41983
(October 6, 1999), 64 FR 56008 (October 15, 1999)
(SR–PCX–98–29).
9 The Pacific Exchange, Inc. was the predecessor
to NYSE Arca.
4 17
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35317
and trading, or the trading pursuant to
unlisted trading privileges, of ICUs
under PCX Equities Rule 5.2(j)(3).10
NYSE Arca Equities Rule 5.2(j)(3)
provides that, upon the initial listing of
a series of ICUs under Rule 19b–4(e),
component stocks that in the aggregate
account for at least 90 percent of the
weight of the index or portfolio
underlying such series must have a
minimum market value of at least $75
million. In addition, the component
stocks in the index or portfolio must
have a minimum monthly trading
volume during each of the last six
months of at least 250,000 shares for
stocks representing at least 90 percent of
the weight of the index or portfolio.
These standards assure that the
underlying index’s or portfolio’s
component stocks are generally actively
traded and with substantial market
capitalization.
Currently, Commentary .01(a)(3) to
NYSE Arca Equities Rule 5.2(j)(3) also
provides that the most heavily weighted
component stock in an underlying index
or portfolio cannot exceed 25 percent of
the weight of the index or portfolio, and
the five most heavily weighted
component stocks cannot exceed 65
percent of the weight of the index or
portfolio. The Exchange proposes to
increase from 25 percent to 30 percent
the permissible weight of the most
heavily weighted component stock in an
underlying index or portfolio.11 The five
most heavily weighted stocks would
continue to be required to represent no
more than 65 percent of the weight of
the index or portfolio. The Exchange
states that this change will provide
additional flexibility to issuers of ICUs
to be listed pursuant to Rule 19b–4(e) in
developing ICUs based on indexes or
portfolios.
The Exchange notes that unit
investment trusts and mutual funds are
subject to Internal Revenue Code
Subchapter M requirements applicable
to regulated investment companies. In
order to maintain regulated investment
company status, these entities would be
required to rebalance their portfolios
quarterly to avoid any one stock
exceeding a 25 percent weighting in the
trust’s or fund’s portfolio.12
10 See Securities Exchange Act Release No. 44551
(July 12, 2001), 66 FR 37716 (July 19, 2001) (SR–
PCX–2001–14).
11 The New York Stock Exchange LLC (‘‘NYSE’’)
recently proposed a substantially identical revision
to its ICU rules. See SR–NYSE–2006–39, available
on the NYSE Web site (https://www.nyse.com), and
infra note 18.
12 According to NYSE Arca, under Subchapter M
of the Internal Revenue Code, for a fund to qualify
as a regulated investment company, the securities
of a single issuer can account for no more than 25
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Continued
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]]>Agencies
[Federal Register Volume 71, Number 117 (Monday, June 19, 2006)]
[Notices]
[Pages 35315-35317]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-9530]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53972; File No. SR-NASD-2006-069]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Extending the Pilot Relating To Manning Price-Improvement
Standards for Decimalized Securities
June 12, 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 June 1, 2006, the National Association of Securities Dealers, Inc.
(``NASD'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by NASD. NASD has designated
the proposal as constituting a ``non-controversial'' proposed rule
change under section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)
thereunder,\4\ which renders it 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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD is proposing to extend through December 31, 2006, the current
pilot price-improvement standards for decimalized securities contained
in NASD Interpretive Material (``IM'') 2110-2--Trading Ahead of
Customer Limit Order (``Manning Rule''). There are no proposed changes
to rule text.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASD included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NASD has prepared summaries, set forth in Sections A, B,
and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASD's Manning Rule requires an NASD member firm to provide a
minimum level of price improvement to incoming orders in Nasdaq and
exchange-listed securities if the firm chooses to trade as principal
with those incoming orders at prices equal to or better than customer
limit orders the firm currently holds.\5\ If a firm fails to provide
the minimum level of price improvement to the incoming order, the firm
must execute its held customer limit orders at the price at which the
firm traded for its own account or better. Generally, if a firm fails
to provide the requisite amount of price improvement and also fails to
execute its held
[[Page 35316]]
customer limit orders, it is in violation of the Manning Rule.
---------------------------------------------------------------------------
\5\ The Commission recently approved amendments to the Manning
Rule to require members to provide price improvement to customer
limit orders in certain circumstances and expand the application of
the Manning Rule to exchange-listed securities. See Securities
Exchange Act Release No. 52210 (August 4, 2005), 70 FR 46897 (August
11, 2005) (SR-NASD-2004-089). These amendments became effective
January 2, 2006. See NASD Notice to Members 05-64.
The Commission also recently approved further amendments to the
Manning Rule to codify NASD's existing position that the Manning
Rule applies to all members, whether acting as a market maker or
not. These amendments became effective April 14, 2006. See
Securities Exchange Act Release No. 53653 (April 14, 2006), 71 FR
20429 (April 20, 2006) (SR-NASD-2006-035).
---------------------------------------------------------------------------
On April 6, 2001,\6\ the Commission approved, on a pilot basis,
price improvement standards for decimalized securities contained in the
Manning Rule, which added the following language to IM-2110-2:
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 44165 (April 6,
2001), 66 FR 19268 (April 13, 2001) (SR-NASD-2001-27).
For Nasdaq securities authorized for trading in decimals
pursuant to the Decimals Implementation Plan For the Equities and
Options Markets, the minimum amount of price improvement necessary
in order for a market maker to execute an incoming order on a
proprietary basis in a security trading in decimals when holding an
unexecuted limit order in that same security, and not be required to
execute the held limit order, is as follows:
(1) For customer limit orders priced at or inside the best
inside market displayed in Nasdaq, the minimum amount of price
improvement required is $0.01; and
(2) For customer limit orders priced outside the best inside
market displayed in Nasdaq, the market maker must price improve the
incoming order by executing the incoming order at a price at least
equal to the next superior minimum quotation increment in Nasdaq
(currently $0.01).\7\
---------------------------------------------------------------------------
\7\ Pursuant to the terms of the Decimals Implementation Plan
for the Equities and Options Markets, the minimum quotation
increment for Nasdaq securities at the outset of decimal pricing is
$0.01. On June 9, 2005, the Commission adopted Rule 612 of
Regulation NMS which establishes minimum pricing increments for NMS
stocks (e.g., Nasdaq and exchange-listed securities). Rule 612 of
Regulation NMS prohibits market participants from displaying,
ranking, or accepting quotations, orders, or indications of interest
in any NMS stock priced in an increment smaller than $0.01 if the
quotation, order, or indication of interest is priced equal to or
greater than $1.00 per share. If the quotation, order, or indication
of interest is priced less than $1.00 per share, the minimum pricing
increment is $0.0001. See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005) (File No. S7-10-04).
Rule 612 of Regulation NMS became effective on January 31, 2006. See
Securities Exchange Act Release No. 52196 (August 2, 2005), 70 FR
45529 (August 8, 2005).
Given the adoption and implementation of Rule 612 of Regulation
NMS, Nasdaq, among other market centers, implemented changes to its
trading systems to accept, rank, execute and disseminate priced
quotations in accordance with Rule 612 of Regulation NMS. Quotations
submitted to Nasdaq that are not in compliance with Rule 612 of
Regulation NMS are rejected.
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Since approval, these standards continue to operate on a pilot
basis that terminates on June 30, 2006.\8\ NASD has determined to seek
an extension of its current Manning Rule pilot until December 31, 2006.
NASD believes that such an extension provides for an appropriate
continuation of the current Manning Rule price improvement standards
while the Commission continues to analyze the issues related to
customer limit order protection in a decimalized environment. NASD is
not proposing any other changes to the pilot at this time. NASD
proposes to make the proposed rule change operative on July 1, 2006.
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\8\ See Securities Exchange Act Release No. 53026 (December 27,
2005), 71 FR 377 (January 4, 2006) (SR-NASD-2005-152).
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2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of section 15A(b)(6) of the Act,\9\ which requires, among
other things, that NASD rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. NASD believes that the proposed rule change will
improve treatment of customer limit orders and enhance the integrity of
the market.
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\9\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASD does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
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 by NASD.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest, provided that NASD
has given the Commission written notice of its intent to file 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,\10\ the proposed rule change has become effective
pursuant to section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6)
thereunder.
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\10\ Rule 19b-4(f)(6)(iii) under the Act requires that a self-
regulatory organization submit to 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
NASD provided notice to the Commission four business days prior to
filing the proposed rule change, and the Commission has determined
to waive the five business day pre-filing notice requirement.
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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.\11\
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\11\ See 15 U.S.C. 78s(b)(3)(C).
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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-2006-069 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-NASD-2006-069. 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 NASD. All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You
[[Page 35317]]
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-NASD-2006-069
and should be submitted on or before July 10, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-9530 Filed 6-16-06; 8:45 am]
BILLING CODE 8010-01-P
