Document ID: SEC-2007-0172-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-02-06T05:00Z

[Federal Register: February 6, 2007 (Volume 72, Number 24)]
[Notices]               
[Page 5479-5481]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06fe07-68]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55206; File No. SR-NASD-2007-008]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Extending the Pilot Periods for NASD Rules Governing 
Multiple MPIDs on the Trade Reporting Facilities and on the Alternative 
Display Facility

January 31, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 5480]]

(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 26, 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 and 
II below, which Items have been substantially prepared by NASD. NASD 
has filed the proposal pursuant to Section 19(b)(3)(A) of the Act \3\ 
and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD proposes to amend NASD Rules 4613A(b) and 5140 to extend the 
pilot programs for the use of multiple Market Participant Symbols 
(``MPIDs'') for Registered Reporting Alternative Display Facility 
(``ADF'') electronic communications networks (``ECNs'') and Trade 
Reporting Facility Participants. 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

Rule 4613A(b) and IM-4613A-1

    Rule 4613A(b) (Character of Quotations) provides that a Registered 
Reporting ADF ECN may request additional MPIDs for displaying quotes 
and orders and reporting trades through the ADF trade reporting 
facility, the Trade Reporting and Comparison Service, for any ADF-
Eligible Security. A Registered Reporting ADF ECN that is permitted the 
use of additional MPIDs for displaying quotes and orders is subject to 
the same rules applicable to the member's first quotation (i.e., an ECN 
that displays one or more additional quotes/orders is required to 
comply with all rules applicable to ECNs in their display of quotes/
orders). A Registered Reporting ADF ECN also is prohibited from using 
an additional MPID to accomplish indirectly what it is prohibited from 
doing directly through its Primary MPID. In addition, NASD staff 
retains full discretion to determine whether a bona fide regulatory 
and/or business need exists for being granted an additional MPID 
privilege and to limit or withdraw the additional MPID display 
privilege at any time. The procedures for requesting, and the 
restrictions surrounding the use of, multiple MPIDs are set forth in 
IM-4613A-1 (Procedures for Allocation of Multiple MPIDs).
    The Commission approved Rule 4613A(b) and IM-4613A-1 on a pilot 
basis on August 11, 2006.\5\ By its terms, the pilot period expires on 
January 26, 2007, and NASD has determined to seek an extension of the 
pilot period until January 25, 2008. NASD believes that such an 
extension will provide additional time to analyze the use of multiple 
MPIDs on the ADF. NASD is not proposing any other changes to the pilot 
as this time.\6\
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    \5\ See Securities Exchange Act Release No. 54307 (August 11, 
2006), 71 FR 47551 (August 17, 2006).
    \6\ The expiration of the pilot period coincided with the 
expiration of the current ADF pilot period. See Securities Exchange 
Act Release No. 53699 (April 21, 2006), 71 FR 25271 (April 28, 
2006). In a separate rule filing, NASD proposed to make the ADF 
rules permanent. See Securities Exchange Act Release No. 55181 
(January 26, 2007) (SR-NASD-2007-005). At this time, NASD is seeking 
to extend only Rule 4613A(b) and IM-4613A-1 for another year.
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Rule 5140 and IM-5140

    Rule 5140 (Multiple MPIDs for Trade Reporting Facility 
Participants) provides that any Trade Reporting Facility Participant 
that wishes to use more than one MPID for purposes of reporting trades 
to a Trade Reporting Facility must submit a written request to, and 
obtain approval from, NASD Operations for such additional MPIDs. In 
addition, IM-5140 (Use of Multiple MPIDs) states that NASD considers 
the issuance of, and trade reporting with, multiple MPIDs to be a 
privilege and not a right. A Trade Reporting Facility Participant must 
identify the purpose(s) and system(s) for which the multiple MPIDs will 
be used. If NASD determines that the use of multiple MPIDs is 
detrimental to the marketplace, or that a Trade Reporting Facility 
Participant is using one or more additional MPIDs improperly or for 
other than the purpose(s) identified by the Participant, NASD staff 
retains full discretion to limit or withdraw its grant of the 
additional MPID(s) to such Trade Reporting Facility Participant for 
purposes of reporting trades to a Trade Reporting Facility. NASD 
believes that Rule 5140 and IM-5140 are necessary to consolidate the 
process of issuing, and tracking the use of, multiple MPIDs used to 
report trades to NASD Trade Reporting Facilities.
    The Commission approved Rule 5140 on a pilot basis on November 6, 
2006.\7\ By its terms, the pilot period expires on January 26, 2007, 
and NASD has determined to seek an extension of the pilot period until 
January 25, 2008. NASD believes that such an extension will provide 
additional time to analyze the use of multiple MPIDs on the Trade 
Reporting Facilities. NASD is not proposing any other changes to the 
pilot as this time. NASD proposes to implement the proposed rule change 
on January 27, 2007.
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    \7\ See Securities Exchange Act Release No. 54715 (November 6, 
2006), 71 FR 66354 (November 14, 2006); see also Securities Exchange 
Act Release No. 54715A (November 14, 2006), 71 FR 67183 (November 
20, 2006) (correcting original approval order).
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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,\8\ 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 is 
consistent with these requirements because it would provide a process 
by which ECNs (in the case of the ADF) and Trade Reporting Facility 
Participants (in the case of the Trade Reporting Facilities) can 
request, and NASD can properly allocate, the use of additional MPIDs 
for displaying quotes and orders through the ADF or reporting trades to 
a Trade Reporting Facility.
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    \8\ 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 would result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

[[Page 5481]]

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 \9\ and Rule 19b-4(f)(6) thereunder \10\ 
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 of filing or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ Rule 19b-4(f)(6) also requires the self-regulatory 
organization to give 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. NASD has satisfied the five-day pre-
filing requirement.
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    NASD has requested that the Commission waive the 30-day operative 
delay in this case. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because such waiver will allow the benefits of the 
multiple MPID pilots to continue uninterrupted. For this reason, the 
Commission designates the proposed rule change to be operative upon 
filing with the Commission.\12\
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    \12\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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 rule-comments@sec.gov. Please include 

File Number SR-NASD-2007-008 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-2007-008. 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-2007-008 and should be submitted on or before February 27, 2007.

    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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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-1859 Filed 2-5-07; 8:45 am]

BILLING CODE 8010-01-P