Federal Register / Vol. 72, No. 42 / Monday, March 5, 2007 / Notices 9807 

11 17 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). 

5See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496 (June 29, 2005) 

(‘‘Regulation NMS Adopting Release’’). 

6 Id. 

7NMS stock is defined in Rule 600(b)(47) of 

Regulation NMS as ‘‘any NMS security other than 

an option.’’ Rule 600(b)(46) of Regulation NMS 

defines NMS security as ‘‘any security or class of 

securities for which transaction reports are 

collected, processed, and made available pursuant 

to an effective transaction reporting plan, or an 

effective national market system plan for reporting 

transactions in listed options.’’

8See 17 CFR 242.611; Securities Exchange Act 

Release Nos. 54389 (August 31, 2006), 71 FR 52829 

(September 7, 2006) (Order Granting an Exemption 

for Qualified Contingent Trades from Rule 611(a) of 

Regulation NMS) and 54678 (October 31, 2006), 71 

FR 65018 (November 6, 2006) (Order Exempting 

Certain Sub-Penny Trade-Throughs from Rule 611 

of Regulation NMS). 

No. SR–NASDAQ–2007–007 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–NASDAQ–2007–007. 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 Commissions 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Exchange. 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-NASDAQ–2007–007 and 

should be submitted on or before March 

26, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–3751 Filed 3–2–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55346; File No. SR–NASD–

2007–014] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Make Conforming 

Changes to the Rules Relating to the 

NASD/NSX TRF, NASD/BSE TRF, and 

NASD/NYSE TRF Consistent With the 

New Requirements of Regulation NMS 

February 26, 2007. 

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 February 

12, 2007, 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, II, and III below, which Items 

have been substantially 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NASD proposes (1) amendments to 

the transaction reporting rules relating 

to the NASD/NSX Trade Reporting 

Facility (‘‘NASD/NSX TRF’’), the 

NASD/BSE Trade Reporting Facility 

(‘‘NASD/BSE TRF’’), and the NASD/ 

NYSE Trade Reporting Facility (‘‘NASD/ 

NYSE TRF’’) (collectively referred to 

herein as the ‘‘Subject TRFs’’) consistent 

with the new requirements of 

Regulation NMS under the Act;5 and (2) 

technical amendments to conform, to 

the extent practicable, the reporting 

rules of the Subject TRFs to the 

reporting rules of the NASD/Nasdaq 

Trade Reporting Facility (‘‘NASD/ 

Nasdaq TRF’’) and NASD’s Alternative 

Display Facility (‘‘ADF’’). The text of the 

proposed rule change is available at 

NASD, the Commission’s Public 

Reference Room, and http:// 

www.nasd.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, 

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 

Background 

On June 29, 2005, the Commission 

published its release adopting 

Regulation NMS,6 which established 

new substantive rules designed to 

modernize and strengthen the regulatory 

structure of the U.S. equities markets. 

Pursuant to Regulation NMS, the 

Commission, among other things, 

adopted Rule 611 (‘‘Order Protection 

Rule’’) to establish protection against 

trade-throughs for NMS stocks.7

In general, the Order Protection Rule 

requires a trading center (which 

includes national securities exchanges, 

self-regulatory organization (‘‘SRO’’) 

trading facilities, alternative trading 

systems, OTC market makers, and block 

positioners) to establish, maintain, and 

enforce written policies and procedures 

that are reasonably designed to prevent 

trade-throughs on that trading center of 

protected quotations and, if relying on 

an exception, that are reasonably 

designed to assure compliance with the 

terms of the exception. There currently 

are nine exceptions and two exemptions 

to the Order Protection Rule.8 In 


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9808 Federal Register / Vol. 72, No. 42 / Monday, March 5, 2007 / Notices 

9See Securities Exchange Act Release No. 54715 

(November 6, 2006), 71 FR 66354 (November 14, 

2006) (SR–NASD–2006–108). The NASD/NSX TRF 

commenced operation for the reporting of over-thecounter trades in Nasdaq-listed securities on 

November 27, 2006 and is expected to expand to 

the reporting of over-the-counter trades in all 

exchange-listed securities in the first quarter of 

2007. 

10See Securities Exchange Act Release No. 54931 

(December 13, 2006), 71 FR 76409 (December 20, 

2006) (SR–NASD–2006–115). The NASD/BSE TRF 

will commence operation upon successful 

completion of system testing and certification 

(currently anticipated to be in the first quarter of 

2007). 

11See Securities Exchange Act Release No. 55325 

(February 21, 2007) (SR–NASD–2007–011). The 

NASD/NYSE TRF will commence operation upon 

successful completion of system testing and 

certification (currently anticipated to be in the first 

quarter of 2007). 

12See Securities Exchange Act Release No. 54537 

(September 28, 2006), 71 FR 59173 (October 6, 

2006) (SR–NASD–2006–091). See also Securities 

Exchange Act Release No. 55088 (January 11, 2007), 

72 FR 2573 (January 19, 2007) (SR–NASD–2007–

001). Unlike the ADF, an NASD Trade Reporting 

Facility (e.g., the NASD/NSX TRF) is a trade 

reporting mechanism only; it does not permit 

quoting. As such, not all of the amendments to the 

ADF rules are applicable to the rules relating to the 

NASD Trade Reporting Facilities. 

13See Securities Exchange Act Release No. 55101 

(January 12, 2007), 72 FR 2568 (January 19, 2007) 

(SR–NASD–2007–002). 

14A Member using the trade report modifiers 

under the proposed new rules is responsible for 

ensuring that the transaction meets the criteria of 

the specific exemption or exception set forth in 

Rule 611 of Regulation NMS. 

15See supra note 8. 

16The National Market System specifications 

identify both types of ISO orders with a single 

modifier. NASD, however, intends to distinguish 

between the ISO exceptions by requiring firms to 

use a separate modifier, as defined by NASD, in 

instances where the executing firm is responsible 

for sweeping the market. 

addition, the Order Protection Rule 

requires trading centers to surveil 

regularly to ascertain the effectiveness 

of the policies and procedures adopted 

pursuant to Rule 611 of Regulation NMS 

and take prompt action to remedy 

deficiencies in such policies and 

procedures. 

On November 6, 2006, the 

Commission approved the 

establishment of the NASD/NSX TRF.9

On December 13, 2006, the Commission 

approved the establishment of the 

NASD/BSE TRF.10 On February 1, 2007, 

NASD filed for immediate effectiveness 

a proposed rule change relating to the 

establishment of the NASD/NYSE 

TRF.11 The Subject TRFs provide 

members additional mechanisms for 

reporting locked-in trades in exchangelisted securities executed otherwise 

than on an exchange. 

Neither NASD, generally, nor any of 

the NASD Trade Reporting Facilities, 

specifically, qualifies as a trading center 

within the meaning of Regulation NMS. 

Thus, the provisions of the Order 

Protection Rule requiring trading 

centers to establish, maintain, and 

enforce written policies and procedures 

that are reasonably designed to prevent 

trade-throughs on that trading center of 

protected quotations in NMS stocks are 

not applicable to NASD. However, 

NASD has a responsibility to enforce 

requirements under the Act that apply 

to activity within its regulatory 

authority. Thus, unlike exchanges that 

have direct Regulation NMS obligations 

with respect to the SRO trading 

facilities, NASD has indirect Regulation 

NMS obligations with respect to all 

over-the-counter market activity, 

including post-trade regulation for 

compliance with the Order Protection 

Rule with respect to trading centers that 

trade report through an NASD Trade 

Reporting Facility. Such regulation 

includes monitoring for whether trading 

centers are reporting trades to an NASD 

Trade Reporting Facility that are tradethroughs of protected quotes and 

whether such trade-throughs are 

permissible under one of the specific 

exceptions and exemptions under the 

Order Protection Rule. 

Proposed Amendments To Align the 

Rules of the Subject TRFs With 

Regulation NMS 

NASD proposes to amend Rule 4632C 

relating to the NASD/NSX TRF, Rule 

4632D relating to the NASD/BSE TRF, 

and Rule 4632E relating to the NASD/ 

NYSE TRF to require reporting members 

to append applicable modifiers to lastsale transaction reports with respect to 

trades that fall within the exceptions 

and exemptions from Rule 611 of 

Regulation NMS. The proposed 

amendments are substantially similar to 

amendments to the transaction reporting 

requirements relating to the ADF, which 

were approved by the Commission on 

September 28, 2006,12 and the NASD/ 

Nasdaq TRF, which were filed for 

immediate effectiveness on January 8, 

2007.13

Specifically, NASD proposes to adopt 

new paragraph (a)(5)(C) of Rule 4632C, 

paragraph (a)(5)(F) of Rule 4632D, and 

paragraph (a)(5)(I) of Rule 4632E to 

require members to append a unique 

modifier, specified by NASD, to indicate 

whether the trade would be a tradethrough of a protected quotation but for 

the trade being qualified for an 

exception or exemption from Rule 611 

of Regulation NMS. Further, NASD 

proposes to adopt new paragraph 

(a)(5)(D) of Rule 4632C, paragraph 

(a)(5)(G) of Rule 4632D, and paragraph 

(a)(5)(J) of Rule 4632E to require that, for 

any trade that would be a trade-through 

of a protected quotation but for the trade 

being qualified for an exception or 

exemption from Rule 611 of Regulation 

NMS, a member must append to the 

transaction report, in addition to the 

modifier required under new Rule 

4632C(a)(5)(C), Rule 4632D(a)(5)(F), and 

Rule 4632E(a)(5)(I), respectively, a 

unique modifier, specified by NASD, 

that identifies the specific applicable 

exception or exemption from Rule 611 

of Regulation NMS upon which the 

member is relying.14 As stated in the 

proposed rules, these modifiers will be 

used in conformity with the 

specifications approved by the 

Operating Committee of the relevant 

National Market System Plans to 

identify trades executed pursuant to an 

exception or exemption from Rule 611 

of Regulation NMS. NASD, along with 

the respective Subject TRFs, will 

publish technical specifications 

regarding the specific modifiers 

required under the proposed new rules. 

Additionally, NASD proposes to 

adopt new paragraph (a)(5)(E) of Rule 

4632C, paragraph (a)(5)(H) of Rule 

4632D, and paragraph (a)(5)(K) of Rule 

4632E to require members to append 

‘‘[a]ny other modifier as specified by 

NASD or the Securities and Exchange 

Commission.’’ An identical provision in 

the ADF rules was subject to notice and 

comment and approved by the 

Commission pursuant to SR–NASD–

2006–091 and also was incorporated in 

Rule 4632 relating to the NASD/Nasdaq 

TRF pursuant to SR–NASD–2007–002. 

Under this proposed provision, NASD 

will have the authority to prescribe 

additional trade report modifiers by 

updating the Technical Specifications 

for the Subject TRFs without submitting 

a further proposed rule change for 

approval by the Commission. For 

example, such authority will be used to 

require additional modifiers to 

designate trades that qualify under two 

existing exemptions from the Order 

Protection Rule (qualified contingent 

trades and certain sub-penny tradethroughs) 15 as well as any other 

exemption that the Commission may 

grant in the future. This authority may 

also be used to capture additional 

regulatory information that NASD 

deems necessary (e.g., NASD will 

require more specific delineation of the 

Intermarket Sweep Order (‘‘ISO’’) 

exception than is required by the 

National Market System 

specifications).16 To enable members to 

make the necessary systems changes, 

NASD would provide at least 30 days 

advance written notice relating to any 

new modifiers. 

NASD also proposes to amend Rules 

4632C, 4632D, and 4632E to expressly 


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Federal Register / Vol. 72, No. 42 / Monday, March 5, 2007 / Notices 9809 

17The NASD/NSX TRF currently does not accept 

‘‘as/of’’trade reports and the rules for the NASD/ 

BSE TRF, which have been approved by the 

Commission but are not yet effective, also do not 

permit the submission of ‘‘as/of’’ trade reports. 

NASD will file a separate proposed rule change to 

reflect the reporting of ‘‘as/of’’ trades to the NASD/ 

NSX TRF and NASD/BSE TRF. Thus, upon the 

operative date of this proposed rule change, 

members will be required to append all applicable 

trade report modifiers to ‘‘as/of’’ trade reports 

submitted to the NASD/NSX TRF and the NASD/ 

BSE TRF. NASD reminds members that they should 

mark any ‘‘as/of’’ trade report for publication if that 

trade would have been for publication had it been 

reported on trade date. 

18See Securities Exchange Act Release No. 55160 

(January 24, 2007), 72 FR 4202 (January 30, 2007). 

19NASD notes that, although the proposed rule 

change will not be operative until the Pilot Stocks 

Phase Date, members may be required to meet the 

Regulation NMS message format requirements for 

reporting to the Subject TRFs prior to that date. 

NASD will notify members of the date of mandatory 

compliance with Regulation NMS message 

formatting requirements for the Subject TRFs and 

on such date, members will be required to report 

in accordance with the new systems requirements, 

although the specific new modifiers proposed 

herein would continue to be voluntary until the 

Pilot Stocks Phase Date. 

20 15 U.S.C. 78o–3(b)(6). 

21 15 U.S.C. 78s(b)(3)(A)(iii). 

22 17 CFR 240.19b–4(f)(6). 

provide that, in the event that the rules 

require multiple modifiers on any given 

trade report, members are to report in 

accordance with guidance published by 

NASD regarding priorities among 

modifiers, if such guidance is provided. 

A Member that reports in accordance 

with such guidance would not be in 

violation of the trade reporting rules for 

failing to use a particular modifier. 

NASD believes that the proposed rule 

change is necessary to ensure that there 

is transparency relating to trades that 

are exempt from the trade-through rule 

and to enhance NASD’s ability to 

examine for compliance with the Order 

Protection Rule. 

Proposed Amendments to Rules of the 

Subject TRFs To Conform to NASD/ 

Nasdaq TRF and ADF Rules 

NASD proposes changes to conform, 

to the extent practicable, the reporting 

rules of the Subject TRFs to the NASD/ 

Nasdaq TRF and ADF reporting rules. 

Specifically, NASD proposes to 

reorganize Rule 4632C relating to the 

NASD/NSX TRF, Rule 4632D relating to 

the NASD/BSE TRF, and Rule 4632E 

relating to the NASD/NYSE TRF and 

renumber paragraphs (a)(3) and (a)(5) of 

Rule 4632C, paragraphs (a)(3) and (a)(6) 

of Rule 4632D, and paragraphs (a)(3) 

and (a)(6) of Rule 4632E, without 

amending the text of those provisions. 

NASD also proposes to renumber 

paragraphs (a)(4), (a)(6), and (a)(8) of 

Rule 4632C, paragraphs (a)(5), (a)(8), 

and (a)(10) of Rule 4632D and 

paragraphs (a)(5), (a)(8), and(a)(10) of 

Rule 4632E, and amend the text of those 

provisions to conform to the text of the 

equivalent provisions in Rule 4632 

relating to the NASD/Nasdaq TRF. 

Additionally, NASD proposes to 

adopt new Rules 4632C(a)(5), 

4632D(a)(5), and 4632E(a)(5) to require 

members to use trade report modifiers 

designated by NASD for certain 

enumerated transactions. As with the 

NASD/Nasdaq TRF and ADF, members 

will be required to include such 

modifiers on all trade reports, including 

reports of ‘‘as/of’’ trades.17 Consistent 

with SR–NASD–2007–001 and SR–

NASD–2007–002, the proposed 

amendments to Rules 4632C, 4632D, 

and 4632E would delete the labels (e.g., 

.T or .W) for the modifiers that members 

are required to use when reporting the 

enumerated transactions. Thus, Rules 

4632C, 4632D, and 4632E would 

identify the types of transactions that 

must have a unique identifier associated 

with them, and such modifiers would be 

labeled in the system technical 

specifications rather than in the rules. 

It should be noted that, because of 

differences in functionality, not all of 

the rules relating to NASD’s Trade 

Reporting Facilities are identical. For 

example, unlike the NASD/Nasdaq TRF, 

the NASD/BSE TRF, and the NASD/ 

NYSE TRF, pursuant to current Rule 

4632C(a)(7), the NASD/NSX TRF does 

not accept trade reports for Stop Stock 

Transactions (as such term is defined in 

Rule 4200C), transactions occurring at 

prices based on average-weighting or 

other special pricing formulae, or 

transactions that reflect a price different 

from the current market when the 

execution price is based on a prior 

reference point in time. In this proposed 

rule change, NASD proposes to 

renumber Rule 4632C(a)(7) as 

4632C(a)(8) without amending the text 

of the rule. 

In addition, neither the NASD/NSX 

TRF nor the NASD/BSE TRF will accept 

trades reported as other than regular 

way settlement (see Rules 6130C(a) and 

6130D(a), respectively). Thus, unlike 

Rule 4632(a)(5) relating to the NASD/ 

Nasdaq TRF and Rule 4632E(a)(5) 

relating to the NASD/NYSE TRF, 

proposed Rules 4632C(a)(5) and 

4632D(a)(5) do not include provisions 

pertaining to trade report modifiers for 

Seller’s Option, Cash, or Next Day 

transactions. 

As discussed in footnote 17 above, the 

NASD/NSX TRF and NASD/BSE TRF 

rules currently do not provide for the 

submission of ‘‘as/of’’ trade reports; 

however, once the necessary system 

changes have been made, NASD will file 

a separate proposed rule change 

proposing amendments to Rules 

4632C(a)(2)(B) and (D) and 

4632D(a)(2)(B) and (D) that are 

consistent with Rule 4632(a)(2)(B) and 

(D) and proposed Rule 4632E(a)(2)(B) 

and (D). 

NASD has filed the proposed rule 

change for immediate effectiveness. In 

accordance with the Regulation NMS 

compliance dates established by the 

Commission,18 NASD proposes to make 

the proposed rule change operative on 

the Pilot Stocks Phase Date, which is 

currently anticipated to be July 9, 2007. 

However, members may begin 

submitting trade reports to the Subject 

TRFs in compliance with the proposed 

rule change after the Trading Phase 

Date, which is currently anticipated to 

be March 5, 2007. This does not change 

in any way a member’s responsibilities 

under the Regulation NMS compliance 

dates.19

2. Statutory Basis 

NASD believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,20 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 

facilitates the goals articulated in 

Regulation NMS, including providing 

an effective mechanism and regulatory 

framework for reporting over-thecounter transactions to NASD. 

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 

The foregoing proposed rule change is 

subject to Section 19(b)(3)(A)(iii) of the 

Act 21 and Rule 19b–4(f)(6) thereunder 22

because the proposal: (i) Does not 

significantly affect the protection of 

investors or the public interest; (ii) does 

not impose any significant burden on 

competition; and (iii) does not become 

operative prior to 30 days after the date 


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9810 Federal Register / Vol. 72, No. 42 / Monday, March 5, 2007 / Notices 

23NASD has satisfied the five-day pre-filing 

requirement. 

24 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See NASD Rule 6610(d) (defining ‘‘OTC Equity 

Security’’). 

4Amendment No. 1 replaced and superseded the 

original filing in its entirety and Amendment No. 

2 replaced and superseded Amendment No. 1 in its 

entirety. 

5See Securities Exchange Act Release No. 54705 

(November 3, 2006), 71 FR 65863 (‘‘Notice’’). 

6See Letter from Shane E. Swanson, Director of 

Compliance, Automated Trading Desk, LLC, to 

Nancy M. Morris, Secretary, Commission, dated 

December 29, 2006. Although this letter was not 

submitted in response to SR–NASD–2005–146, the 

letter referred to the instant filing and expressed 

support for NASD’s proposal to require the lesser 

of $0.01 or 1⁄2 the spread of price improvement with 

respect to the implementation of Manning Rule 

protection to orders priced below $1.00. 

7The text of Amendment No. 3 is available at 

NASD, the Commission’s Public Reference Room, 

and http://www.nasd.com. 

8See NASD Rule 2110. 

9See Securities Exchange Act Release No. 52210 

(August 4, 2005), 70 FR 46897 (August 11, 2005) 

(SR–NASD–2004–089) (approving the expansion of 

IM–2110–2, which previously applied only to 

Nasdaq securities, to exchange-listed securities). 

See also NASD Notice to Members 05–64 (October 

2005) (announcing Commission approval of the 

amendments to IM–2110–2, which became effective 

on January 2, 2006). 

of filing 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 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.23

At any time within 60 days of the 

filing of such proposed rule change the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASD–2007–014 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–2007–014. 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 (http://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 the 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–2007–014 and 

should be submitted on or before March 

26, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.24

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–3744 Filed 3–2–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55351; File No. SR–NASD–

2005–146] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing of 

Amendment No. 3 to and Order 

Granting Accelerated Approval of a 

Proposed Rule Change as Modified by 

Amendment Nos. 2 and 3 Thereto To 

Expand the Scope of IM–2110–2 

Relating To Trading Ahead of 

Customer Limit Orders To Apply to All 

OTC Equity Securities 

February 26, 2007. 

I. Introduction 

On December 9, 2005, the National 

Association of Securities Dealers, Inc. 

(‘‘NASD’’) 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 expand the 

scope of NASD Interpretive Material 

(‘‘IM’’) 2110–2, Trading Ahead of 

Customer Limit Order (‘‘IM–2110–2’’, 

which is commonly referred to as the 

‘‘Manning Rule’’), and any interpretive 

guidance thereunder, to include overthe-counter (‘‘OTC’’) equity securities.3

On September 26, 2006, NASD filed 

Amendment No. 1 to the proposed rule 

change, and on October 19, 2006, NASD 

filed Amendment No. 2 to the proposed 

rule change.4 The proposed rule change, 

as amended, was published for 

comment in the Federal Register on 

November 9, 2006.5 The Commission 

received one comment letter on the 

proposal, which supported the 

proposal.6 On February 6, 2007, the 

Exchange filed Amendment No. 3 to the 

proposed rule change.7 This order 

provides notice of Amendment No. 3 to 

the proposed rule change and approves 

the proposed rule change as modified by 

Amendment Nos. 2 and 3 on an 

accelerated basis. 

II. Description of the Proposal 

NASD’s Manning Rule generally 

prohibits an NASD member from 

trading for its own account in an 

exchange-listed security at a price that 

is equal to or better than an unexecuted 

customer limit order in that security, 

unless the member immediately 

thereafter executes the customer limit 

order at the price at which it traded for 

its own account or better. The legal 

underpinnings for the Manning Rule are 

a member’s fiduciary obligations and 

the requirement that a member must, in 

the conduct of its business, ‘‘observe 

high standards of commercial honor and 

just and equitable principles of trade.’’ 8

IM–2110–2 currently applies to 

exchange-listed securities, 9 but does not 

apply to OTC equity securities. 

NASD Rule 6541 extends the general 

principles of the Manning Rule to a 

subset of OTC equity securities—

specifically, those equity securities that 

are quoted on NASD’s OTC Bulletin 

Board (‘‘OTCBB’’). NASD Rule 6541, 

however, differs from IM–2110–2 in 


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