Self-Regulatory Organizations: National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to NASD Rule 5100 (Short Sale Rule), 43256-43258 [E6-12176]
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Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices
IV. Discussion
The Commission finds that the
proposed rule change, as amended, is
consistent with the requirements of
Section 6 of the Act 9 and the rules and
regulations thereunder applicable to a
national securities exchange.10 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,11 which
requires, among other things, that the
rules of an exchange be designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
The Commission believes that the
proposed change to clarify the
requirements of the Exchange’s priority
rule is designed to provide both
investors and specialists with a better
understanding of a specialist’s
obligations. The Commission further
believes that the proposed change to
require specialists to make use of order
match functionalities, except under
limited circumstances, could prevent
potential trading ahead violations from
occurring by ensuring that eligible
orders on the book are executed in place
of the specialist’s proprietary interest.
The Commission finds good cause for
approving Amendment No. 3 to the
proposed rule change prior to the
thirtieth day after publishing notice of
Amendment No. 3 in the Federal
Register pursuant to Section 19(b)(2) of
the Act.12 The Commission believes that
the changes proposed in Amendment
No. 3 clarify the application of the
Exchange’s priority rule and proposed
exception to the requirement to use
order match functionalities. Further, the
Commission believes the proposal in
Amendment No. 3 to eliminate one of
the exceptions proposed in the Notice
reflects the specialist’s obligations
under the Exchange’s rules.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–CHX–2005–
01), as amended by Amendment Nos. 1,
9 15
U.S.C. 78f.
approving this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
11 15 U.S.C. 78f(b)(5).
12 15 U.S.C 78s(b)(2). Pursuant to Section 19(b)(2)
of the Act, the Commission may not approve any
proposed rule change, or amendment thereto, prior
to the thirtieth day after the date of publication of
the notice thereof, unless the Commission finds
good cause for so doing.
13 15 U.S.C. 78s(b)(2).
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10 In
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2, and 3, is hereby approved, and that
Amendment No. 3 is approved on an
accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.14
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–12184 Filed 7–28–06; 8:45 am]
5100 will become effective on the date
upon which the Nasdaq Exchange
operates as a national securities
exchange for Nasdaq-listed securities.4
Currently, that date is projected to be
August 1, 2006.
Below is the text of the proposed rule
change. Proposed new language is
italicized.
*
*
*
*
*
BILLING CODE 8010–01–P
5000. Trading OtherWise Than on an
Exchange
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54203; File No. SR–NASD–
2006–089]
Self-Regulatory Organizations:
National Association of Securities
Dealers, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to NASD Rule
5100 (Short Sale Rule)
July 25, 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 July 21,
2006, the National Association of
Securities Dealers, Inc. (‘‘NASD’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by NASD. NASD
has designated the proposed rule change
as constituting a ‘‘non-controversial’’
rule change under paragraph (f)(6) of
Rule 19b–4 under the Act,3 which
renders the proposal effective upon
receipt of this filing by the Commission.
NASD proposes to implement the
proposed rule change on the date on
which The Nasdaq Stock Market LLC
(the ‘‘Nasdaq Exchange’’) commences
operation as a national securities
exchange for Nasdaq-listed securities.
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
NASD is proposing to amend NASD
Rule 5100 to allow members to use, for
a transitional period only, the Nasdaq
Exchange best (inside) bid rather than
the national best (inside) bid for
purposes of application of the rule.
Pursuant to SR–NASD–2005–087, Rule
PO 00000
14 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.I9b–4.
3 17 CFR 240.19b–4(f)(6).
Frm 00163
Fmt 4703
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*
*
*
*
*
5100. Short Sale Rule
(a) With respect to trades reported to
the ADF or the Trade Reporting Facility,
no member shall effect a short sale in a
Nasdaq Global Market Security (as that
term is defined in Rule 4200) otherwise
than on an exchange for the account of
a customer or for its own account at or
below the current national best (inside)
bid when the current national best
(inside) bid is below the preceding
national best (inside) bid in the security.
In addition, for a transitional period
ending on November 3, 2006, members
may use the Nasdaq Exchange best
(inside) bid rather than the national best
(inside) bid for purposes of the
application of this rule, provided that
the member has submitted prior written
notification to NASD of this selection.
Members are required to use the same
bid tick test on a firm-wide basis. A
member using the Nasdaq Exchange
best (inside) bid may not use the
national best (inside) bid prior to the
end of the transitional period unless the
member submits prior written
notification to NASD of this change. For
the purposes of this rule, the term
‘‘customer’’ includes a non-member
broker-dealer.
(b) through (l) No Change.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
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,
4 NASD filed SR–NASD–2005–987 on July 11,
2005 and Amendment No. 1 on June 15, 2006. The
Commission approved SR–NASD–2005–087, as
amended, on June 30, 2006. See Exchange Act
Release No. 54084 (June 30, 2006), 71 FR 38935
(July 10, 2006).
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Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices
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
sroberts on PROD1PC70 with NOTICES
Background
On June 30, 2006, the Commission
approved SR–NASD–2005–087.5 Among
other things, SR–NASD–2005–087
proposed (1) amendments to the NASD
Delegation Plan, NASD By-Laws and
NASD rules to reflect a proposed phased
implementation strategy for the
operation of the Nasdaq Exchange as a
national securities exchange with
respect to Nasdaq-listed securities
during a transitional period, and (2)
rules for reporting transactions effected
otherwise than on an exchange to the
new Trade Reporting Facility.
NASD is filing this proposed rule
change in anticipation of SR–NASD–
2005–087 becoming effective to amend
Rule 5100 to allow members to use, for
a transitional period only, the Nasdaq
Exchange best (inside) bid rather than
the national best (inside) bid for
purposes of application of the rule.
Proposed Amendment to Rule 5100
Pursuant to SR–NASD–2005–087,
NASD proposed to renumber Rule 3350
(Short Sale Rule) as Rule 5100 under the
Rule 5000 Series (Trading Otherwise
Than On An Exchange). Rule 5100
provides that, with respect to trades
reported to NASD’s Alternative Display
Facility or the Trade Reporting Facility,
no member shall effect a short sale in a
Nasdaq Global Market Security
otherwise than on an exchange at or
below the current national best (inside)
bid when the current national best
(inside) bid is below the preceding
national best (inside) bid.
Pursuant to current Rule 3350(a)(2),
with respect to trades in Nasdaq Global
Market securities reported to Nasdaq,
the application of the rule is based on
the best (inside) bid displayed in the
Nasdaq Market Center. Thus, some
members are currently using the Nasdaq
best bid for purposes of the application
of this rule and may need additional
time to revise their systems to use the
national best bid for purposes of overthe-counter trading reported to the
Trade Reporting Facility. Accordingly,
NASD is proposing to amend Rule 5100
to provide that, for a transitional period
ending on November 3, 2006,6 members
5 Id.
6 NASD contemplates that when the transitional
period expires on November 3, 2006, this
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17:34 Jul 28, 2006
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may use the Nasdaq Exchange best
(inside) bid rather than the national best
(inside) bid for purposes of application
of the rule. Members must submit prior
written notice to NASD of this selection
and will be required to use the same bid
tick test on a firm-wide basis. The
proposed rule change would also
expressly provide that a member using
the Nasdaq Exchange best (inside) bid
may not use the national best (inside)
bid prior to the end of the transitional
period on November 3, 2006 unless the
member submits prior written notice to
NASD of this change.
As noted in Item 2 of this filing,
NASD has filed the proposed rule
change for immediate effectiveness. The
effective date will be the date upon
which the Nasdaq Exchange operates as
a national securities exchange for
Nasdaq-listed securities, which is the
effective date of SR–NASD–2005–087.
2. Statutory Basis
NASD believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,7 which
requires, among other things, that NASD
rules 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 protect investors because it will
afford members sufficient time to make
necessary systems adjustments to ensure
compliance with the Short Sale Rule.
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.
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
amendment will be automatically deleted from the
NASD Manual without submission of another
proposed rule change.
7 15 U.S.C. 78o–3(b)(6).
PO 00000
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43257
(iii) Become operative for 30 days
from the date on which it was filed, or
such shorter time as the Commission
may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act and Rule 19b–4(f)(6) thereunder.8 A
proposed rule change filed under 19b–
4(f)(6) normally may not become
operative prior to 30 days after the date
of filing.9 However, Rule 19b–
4(f)(6)(iii) 10 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest.
NASD has requested that the
Commission waive the 30-day preoperative delay and the five-day prefiling notice requirement and designate
the proposed rule change, as amended,
to become effective upon filing. NASD
believes that the waiver of the five-day
pre-filing requirement is necessary so
that members will have certainty with
respect to this change and can be
formally notified immediately. NASD
believes that the waiver of the 30-day
operative requirement is necessary so
that the proposed rule change can
become effective on the same date that
SR–NASD–2005–087 becomes effective.
As noted above, it is currently
anticipated that the effective date will
be August 1, 2006. The Commission
believes that waiving the 30-day preoperative delay and the five-day prefiling notice requirement is consistent
with the protection of investors and the
public interest because it will maintain
the status quo for NASD members while
they revise their systems. For the
reasons stated above, the Commission
designates the proposal to become
effective and operative on the same date
that SR–NASD–2005–087 becomes
effective, currently anticipated to be
August 1, 2006.11
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.12
8 17
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
10 Id.
11 For purposes only of accelerating the operative
date of this proposal, the Commission has
considered the impact of the proposed rule on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
12 For purposes of calculating the 60-day period
within which the Commission may summarily
abrogate the proposal, the Commission considers
the period to commence on July 21, 2006, the date
on which the Exchange submitted this filing.
9 17
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43258
Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices
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–2006–089 on the
subject line.
sroberts on PROD1PC70 with NOTICES
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–2006–089. 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
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NASD–2006–089 and
should be submitted on or before
August 21, 2006.
VerDate Aug<31>2005
17:34 Jul 28, 2006
Jkt 208001
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–12176 Filed 7–28–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54194; File No. SR–NSX–
2006–10]
Self-Regulatory Organizations;
National Stock Exchange; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adopt a
New Chapter XVI of the NSX Rules
Relating to Dues, Fees, Assessments,
Charges, and Market Data Rebate
Programs
July 24, 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 July 13,
2006, National Stock Exchange (‘‘NSX’’
or ‘‘Exchange’’) 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 NSX. NSX filed the proposed rule
change pursuant to 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.5 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
NSX proposes to adopt Chapter XVI of
its Rules relating to dues, fees,
assessments, charges and market data
revenue sharing programs. The text of
the proposed rule change is available at
the Commission, at NSX, and at
www.nsx.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NSX included statements concerning
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–(4)(f)(6).
5 NSX provided the Commission with written
notice of its intent to file the proposed rule change
on June 29, 2006. See Section 19(b)(3)(A) of the Act,
and Rule 19b–4(f)(6)(iii) thereunder. 15 U.S.C.
78s(b)(3)(A), 17 CFR 240.19b–4(f)(6)(iii).
PO 00000
13 17
1 15
Frm 00165
Fmt 4703
Sfmt 4703
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. NSX 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
NSX Rule 11.10 currently sets forth
the Exchange’s fees, dues and rebate
programs. NSX proposes to remove the
language in NSX Rule 11.10 concerning
fees, dues and rebate programs in
connection with the Exchange’s
proposed changes to Chapter XI of its
Rules, which are part of a separate
proposed rule change.6 The Exchange
proposes to adopt Chapter XVI relating
to fees, dues and rebate programs.
Chapter XVI will replace current NSX
Rule 11.10 when the Exchange’s
proposed changes to Chapter XI of its
Rules become effective.
Proposed NSX Rule 16.1(a) authorizes
the Exchange to prescribe such
reasonable dues, fees, assessments or
other charges as it may, in its discretion,
deem appropriate. Such dues, fees,
assessments and charges may include
ETP Holder dues, transaction fees,
communication and technology fees,
regulatory charges, listing fees, and
other fees and charges as the Exchange
may determine. NSX Rule 16.1 further
provides that all dues, fees and charges
shall be equitably allocated among ETP
Holders, issuers and other persons using
the Exchange’s facilities.
Proposed NSX Rule 16.1(b) provides
for a regulatory transaction fee pursuant
to Section 31 of the Act.7 This proposed
Rule is identical to current Exchange
Rule 11.10(q).
Proposed NSX Rule 16.1(c) states that
the Exchange will provide ETP Holders
with notice of all relevant dues, fees,
assessments and charges. The Exchange
proposes to maintain a separate fee
schedule that contains its current fees,
dues and other charges, instead of
including all of its specific fees, dues
and charges in the text of its Rules (as
it currently does with NSX Rule 11.10).
The Exchange notes that this approach
is consistent with the approach taken by
other national securities exchanges.8
6 See
SR–NSX–2006–08.
U.S.C. 78ee.
8 See, e.g., Chicago Stock Exchange, Article XIV,
Rules 1, 2 and 7; NYSE Arca Equities Rule 3.7.
7 15
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]]>Agencies
[Federal Register Volume 71, Number 146 (Monday, July 31, 2006)]
[Notices]
[Pages 43256-43258]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-12176]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54203; File No. SR-NASD-2006-089]
Self-Regulatory Organizations: National Association of Securities
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to NASD Rule 5100 (Short Sale Rule)
July 25, 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 July 21, 2006, the National Association of Securities Dealers, Inc.
(``NASD'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by NASD. NASD has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. NASD proposes to implement the proposed rule change on the
date on which The Nasdaq Stock Market LLC (the ``Nasdaq Exchange'')
commences operation as a national securities exchange for Nasdaq-listed
securities. 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.I9b-4.
\3\ 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 amend NASD Rule 5100 to allow members to use,
for a transitional period only, the Nasdaq Exchange best (inside) bid
rather than the national best (inside) bid for purposes of application
of the rule. Pursuant to SR-NASD-2005-087, Rule 5100 will become
effective on the date upon which the Nasdaq Exchange operates as a
national securities exchange for Nasdaq-listed securities.\4\
Currently, that date is projected to be August 1, 2006.
---------------------------------------------------------------------------
\4\ NASD filed SR-NASD-2005-987 on July 11, 2005 and Amendment
No. 1 on June 15, 2006. The Commission approved SR-NASD-2005-087, as
amended, on June 30, 2006. See Exchange Act Release No. 54084 (June
30, 2006), 71 FR 38935 (July 10, 2006).
---------------------------------------------------------------------------
Below is the text of the proposed rule change. Proposed new
language is italicized.
* * * * *
5000. Trading OtherWise Than on an Exchange
* * * * *
5100. Short Sale Rule
(a) With respect to trades reported to the ADF or the Trade
Reporting Facility, no member shall effect a short sale in a Nasdaq
Global Market Security (as that term is defined in Rule 4200) otherwise
than on an exchange for the account of a customer or for its own
account at or below the current national best (inside) bid when the
current national best (inside) bid is below the preceding national best
(inside) bid in the security. In addition, for a transitional period
ending on November 3, 2006, members may use the Nasdaq Exchange best
(inside) bid rather than the national best (inside) bid for purposes of
the application of this rule, provided that the member has submitted
prior written notification to NASD of this selection. Members are
required to use the same bid tick test on a firm-wide basis. A member
using the Nasdaq Exchange best (inside) bid may not use the national
best (inside) bid prior to the end of the transitional period unless
the member submits prior written notification to NASD of this change.
For the purposes of this rule, the term ``customer'' includes a non-
member broker-dealer.
(b) through (l) No Change.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, 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,
[[Page 43257]]
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
Background
On June 30, 2006, the Commission approved SR-NASD-2005-087.\5\
Among other things, SR-NASD-2005-087 proposed (1) amendments to the
NASD Delegation Plan, NASD By-Laws and NASD rules to reflect a proposed
phased implementation strategy for the operation of the Nasdaq Exchange
as a national securities exchange with respect to Nasdaq-listed
securities during a transitional period, and (2) rules for reporting
transactions effected otherwise than on an exchange to the new Trade
Reporting Facility.
---------------------------------------------------------------------------
\5\ Id.
---------------------------------------------------------------------------
NASD is filing this proposed rule change in anticipation of SR-
NASD-2005-087 becoming effective to amend Rule 5100 to allow members to
use, for a transitional period only, the Nasdaq Exchange best (inside)
bid rather than the national best (inside) bid for purposes of
application of the rule.
Proposed Amendment to Rule 5100
Pursuant to SR-NASD-2005-087, NASD proposed to renumber Rule 3350
(Short Sale Rule) as Rule 5100 under the Rule 5000 Series (Trading
Otherwise Than On An Exchange). Rule 5100 provides that, with respect
to trades reported to NASD's Alternative Display Facility or the Trade
Reporting Facility, no member shall effect a short sale in a Nasdaq
Global Market Security otherwise than on an exchange at or below the
current national best (inside) bid when the current national best
(inside) bid is below the preceding national best (inside) bid.
Pursuant to current Rule 3350(a)(2), with respect to trades in
Nasdaq Global Market securities reported to Nasdaq, the application of
the rule is based on the best (inside) bid displayed in the Nasdaq
Market Center. Thus, some members are currently using the Nasdaq best
bid for purposes of the application of this rule and may need
additional time to revise their systems to use the national best bid
for purposes of over-the-counter trading reported to the Trade
Reporting Facility. Accordingly, NASD is proposing to amend Rule 5100
to provide that, for a transitional period ending on November 3,
2006,\6\ members may use the Nasdaq Exchange best (inside) bid rather
than the national best (inside) bid for purposes of application of the
rule. Members must submit prior written notice to NASD of this
selection and will be required to use the same bid tick test on a firm-
wide basis. The proposed rule change would also expressly provide that
a member using the Nasdaq Exchange best (inside) bid may not use the
national best (inside) bid prior to the end of the transitional period
on November 3, 2006 unless the member submits prior written notice to
NASD of this change.
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\6\ NASD contemplates that when the transitional period expires
on November 3, 2006, this amendment will be automatically deleted
from the NASD Manual without submission of another proposed rule
change.
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As noted in Item 2 of this filing, NASD has filed the proposed rule
change for immediate effectiveness. The effective date will be the date
upon which the Nasdaq Exchange operates as a national securities
exchange for Nasdaq-listed securities, which is the effective date of
SR-NASD-2005-087.
2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\7\ which requires, among
other things, that NASD rules 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
protect investors because it will afford members sufficient time to
make necessary systems adjustments to ensure compliance with the Short
Sale Rule.
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\7\ 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.
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, it has
become effective pursuant to Section 19(b)(3)(A) of the Act and Rule
19b-4(f)(6) thereunder.\8\ A proposed rule change filed under 19b-
4(f)(6) normally may not become operative prior to 30 days after the
date of filing.\9\ However, Rule 19b-4(f)(6)(iii) \10\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest.
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\8\ 17 CFR 240.19b-4(f)(6).
\9\ 17 CFR 240.19b-4(f)(6)(iii).
\10\ Id.
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NASD has requested that the Commission waive the 30-day pre-
operative delay and the five-day pre-filing notice requirement and
designate the proposed rule change, as amended, to become effective
upon filing. NASD believes that the waiver of the five-day pre-filing
requirement is necessary so that members will have certainty with
respect to this change and can be formally notified immediately. NASD
believes that the waiver of the 30-day operative requirement is
necessary so that the proposed rule change can become effective on the
same date that SR-NASD-2005-087 becomes effective. As noted above, it
is currently anticipated that the effective date will be August 1,
2006. The Commission believes that waiving the 30-day pre-operative
delay and the five-day pre-filing notice requirement is consistent with
the protection of investors and the public interest because it will
maintain the status quo for NASD members while they revise their
systems. For the reasons stated above, the Commission designates the
proposal to become effective and operative on the same date that SR-
NASD-2005-087 becomes effective, currently anticipated to be August 1,
2006.\11\
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\11\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the impact of the
proposed rule on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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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.\12\
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\12\ For purposes of calculating the 60-day period within which
the Commission may summarily abrogate the proposal, the Commission
considers the period to commence on July 21, 2006, the date on which
the Exchange submitted this filing.
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[[Page 43258]]
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-2006-089 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-2006-089. 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 should submit only information that you wish to
make available publicly. All submissions should refer to File Number
SR-NASD-2006-089 and should be submitted on or before August 21, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-12176 Filed 7-28-06; 8:45 am]
BILLING CODE 8010-01-P
