Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend a Pilot Program That Increases Position and Exercise Limits for Certain Equity Options, 50961-50962 [E6-14197]
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Federal Register / Vol. 71, No. 166 / Monday, August 28, 2006 / Notices
purpose of order handling and
execution.26
Amendment No. 5 is purely a
technical amendment, as its substance
was published for notice and comment
in Amendment Nos. 3 and 4. With
Amendment No. 5, NASD took the
substance of Amendment Nos. 3 and 4
and placed that information in IM–2320.
mstockstill on PROD1PC61 with NOTICES
IV. Discussion and Commission
Findings
The Commission has reviewed
carefully the proposed rule change, the
comment letters, and NASD’s response
to the comments, and believes that
NASD has responded appropriately to
the concerns raised by the commenters.
The Commission finds that the
proposed rule change, as amended, is
consistent with the requirements of the
Act and rules and regulations
thereunder applicable to a national
securities association, and, in particular,
with Section 15A(b)(6) of the Act, which
requires, among other things, that the
rules of a national securities association
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.27
Regarding the commenters’ assertion
that a recipient broker-dealer’s
compliance with the terms and
conditions of the order, as
communicated by the originating
broker-dealer, solely, should constitute
satisfaction of the duty of best execution
with regard to routed orders, the
Commission believes that such
compliance should be considered a
significant factor in determining if the
recipient broker-dealer has met its duty
of best execution, but should not be the
sole factor to consider. In Amendment
Nos. 3 and 4, NASD addressed the
concerns raised by commenters. In
response to issues raised by the BMA,
NASD changed the terminology of the
proposed rule change, replacing
‘‘market center’’ with ‘‘market’’ and
stating that it will interpret the term
broadly. Additionally, the Commission
notes that the Best Execution Rule
currently applies to the bond markets.28
NASD indicated in its amendment how
it intends to apply the factors in the rule
that provide evidence of reasonable
diligence in the context of the bond
market, and how it will interpret price
26 See
footnote 9, supra.
U.S.C. 78o-3(b)(6). In approving this
proposed rule change, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
28 See footnote 24, supra, and Exempted
Securities Order.
27 15
VerDate Aug<31>2005
15:09 Aug 25, 2006
Jkt 208001
50961
in connection with debt. In Amendment
No. 4, NASD made a clear distinction
between a member’s duties when acting
as provider of liquidity versus acting as
an order handler for another brokerdealer. The Commission believes that
the revisions clarify how the rule
applies in the context of the debt
market. Furthermore, the Commission
notes that, at the time NASD adopted its
Best Execution Rule, the equity markets
were subject to a regulatory regime
similar to the one under which the bond
markets operate today.29 The
Commission expects that the NASD will
take into account the structure and
operation of the debt markets when
applying the rule to debt market
participants.
With regard to the commenters’ claim
that the proposal would create an unfair
competitive disparity between
otherwise similarly situated market
centers that execute orders on an
electronic agency basis, the Commission
notes that electronic communications
networks (‘‘ECNs’’) are subject to a
different regulatory regime than SROs.
ECNs are broker-dealers by definition,
and must be members of an SRO;
consequently ECNs are subject to SRO
rules. Moreover, the Commission
believes the proposed rule change, as
amended, will not unfairly affect ECN
operations.
With respect to the commenters’
concern that implementation of this
proposal should be delayed until after
the Commission has adopted guidance
under the trade through proposal of
Regulation NMS, the Commission notes
that the Commission adopted
Regulation NMS subsequent to the
commenters filing their comment
letters.
Finally, the Commission views
markup obligations and the duty of best
execution as separate and distinct
requirements. NASD Rule 2320(f) states
that best execution obligations ‘‘do not
relate to the reasonableness of
commission rates, markups or
markdowns which are governed by Rule
2440 and IM–2440.’’
proposed rule change (SR–NASD–2004–
026), as modified by Amendment Nos.
1–5, be, and it hereby is, approved.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,30 that the
NASD proposes to amend NASD Rule
2860 to extend a pilot program
increasing certain options position and
exercise limits. The text of the proposed
rule change is available on NASD’s Web
site (https://www.nasd.com), at NASD’s
principal office, and at the
Commission’s Public Reference Room.
29 As NASD notes, in 1968 when the Best
Execution Rule was adopted, the market for equity
securities was much different than it is today. For
example, there was no consolidated tape and thus
no readily available trade or quotation information.
Market makers in over-the-counter securities
conducted transactions via telephone, after
checking prices either in the pink sheets or by
information they obtained using the telephone. In
addition, there was no requirement to report
transactions to NASD within 90 seconds.
30 30 15 U.S.C. 78s(b)(2).
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Fmt 4703
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For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.31
Nancy M. Morris,
Secretary.
[FR Doc. E6–14196 Filed 8–25–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54334; File No. SR–NASD–
2006–097]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Extend a Pilot
Program That Increases Position and
Exercise Limits for Certain Equity
Options
August 18, 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 August
10, 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
filed the proposal as a ‘‘noncontroversial’’ 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. 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
31 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
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50962
Federal Register / Vol. 71, No. 166 / Monday, August 28, 2006 / Notices
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
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.
Written comments were neither
solicited nor received.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NASD proposes to amend NASD Rule
2860 to extend a pilot program until
March 1, 2007 (unless extended)
increasing position and exercise limits
for both standardized and conventional
options (‘‘Pilot Program’’).5 Unless
extended, the Pilot Program will expire
on September 1, 2006.6 NASD believes
that the Pilot Program should be
extended so that it may continue
without interruption for the same
reasons that are discussed in the Pilot
Program Notice.
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’s 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. The proposed rule
change is being made so that the Pilot
Program, which achieves these goals as
discussed in the Pilot Program Notice,
may continue without interruption.
mstockstill on PROD1PC61 with NOTICES
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, as amended.
5 See Securities Exchange Act Release No. 51520
(April 11, 2005), 70 FR 19977 (April 15, 2005)
(notice of filing and immediate effectiveness of SR–
NASD–2005–040) (‘‘Pilot Program Notice’’).
6 See Securities Exchange Act Release No. 53346
(February 22, 2006), 71 FR 10580 (March 1, 2006)
(notice of filing and immediate effectiveness of SR–
NASD–2006–025).
7 15 U.S.C. 78o–3(b)(6).
15:09 Aug 25, 2006
Jkt 208001
Because the forgoing rule change does
not: (1) Significantly affect the
protection of investors or the public
interest; (2) impose any significant
burden on competition; and (3) become
operative for 30 days after the date of
this filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 8 and Rule 19b–
4(f)(6) thereunder.9
A proposed rule change filed under
19b–4(f)(6) normally may not become
operative prior to 30 days after the date
of filing.10 However, Rule 19b–
4(f)(6)(iii) 11 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. NASD
provided the Commission with written
notice of its intent to file this proposed
rule change at least five business days
prior to the date of filing the proposed
rule change. In addition, NASD has
requested that the Commission waive
the 30-day pre-operative delay. The
Commission believes that waiving the
30-day pre-operative delay is consistent
with the protection of investors and in
the public interest because it will allow
the Pilot Program to continue
uninterrupted.12
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 Act.
IV. Solicitation of Comments
B. Self-Regulatory Organization’s
Statement on Burden on Competition
VerDate Aug<31>2005
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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:
8 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
10 17 CFR 240.19b–4(f)(6)(iii).
11 Id.
12 For the purposes only of waiving the preoperative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
9 17
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
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
No. SR–NASD–2006–097 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 No.
SR–NASD–2006–097. 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 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 No.
SR–NASD–2006–097 and should be
submitted on or before September 18,
2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
Nancy M. Morris,
Secretary.
[FR Doc. E6–14197 Filed 8–25–06; 8:45 am]
BILLING CODE 8010–01–P
13 17
E:\FR\FM\28AUN1.SGM
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 71, Number 166 (Monday, August 28, 2006)]
[Notices]
[Pages 50961-50962]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-14197]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54334; File No. SR-NASD-2006-097]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Extend a Pilot Program That Increases Position and
Exercise Limits for Certain Equity Options
August 18, 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 August 10, 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 filed the
proposal as a ``non-controversial'' rule change pursuant to Section
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which
renders 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 proposes to amend NASD Rule 2860 to extend a pilot program
increasing certain options position and exercise limits. The text of
the proposed rule change is available on NASD's Web site (https://
www.nasd.com), at NASD's principal office, and at the Commission's
Public Reference Room.
[[Page 50962]]
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 proposes to amend NASD Rule 2860 to extend a pilot program
until March 1, 2007 (unless extended) increasing position and exercise
limits for both standardized and conventional options (``Pilot
Program'').\5\ Unless extended, the Pilot Program will expire on
September 1, 2006.\6\ NASD believes that the Pilot Program should be
extended so that it may continue without interruption for the same
reasons that are discussed in the Pilot Program Notice.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 51520 (April 11,
2005), 70 FR 19977 (April 15, 2005) (notice of filing and immediate
effectiveness of SR-NASD-2005-040) (``Pilot Program Notice'').
\6\ See Securities Exchange Act Release No. 53346 (February 22,
2006), 71 FR 10580 (March 1, 2006) (notice of filing and immediate
effectiveness of SR-NASD-2006-025).
---------------------------------------------------------------------------
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's 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. The proposed rule change is being made so that the
Pilot Program, which achieves these goals as discussed in the Pilot
Program Notice, may continue without interruption.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
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, as amended.
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 forgoing rule change does not: (1) Significantly affect
the protection of investors or the public interest; (2) impose any
significant burden on competition; and (3) become operative for 30 days
after the date of this filing, or such shorter time as the Commission
may designate, it has become effective pursuant to Section 19(b)(3)(A)
of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\10\
However, Rule 19b-4(f)(6)(iii) \11\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. NASD provided the Commission with
written notice of its intent to file this proposed rule change at least
five business days prior to the date of filing the proposed rule
change. In addition, NASD has requested that the Commission waive the
30-day pre-operative delay. The Commission believes that waiving the
30-day pre-operative delay is consistent with the protection of
investors and in the public interest because it will allow the Pilot
Program to continue uninterrupted.\12\
---------------------------------------------------------------------------
\10\ 17 CFR 240.19b-4(f)(6)(iii).
\11\ Id.
\12\ For the purposes only of waiving the pre-operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance 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:
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 No. SR-NASD-2006-097 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 No. SR-NASD-2006-097. 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 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 No. SR-
NASD-2006-097 and should be submitted on or before September 18, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Nancy M. Morris,
Secretary.
[FR Doc. E6-14197 Filed 8-25-06; 8:45 am]
BILLING CODE 8010-01-P
