Document ID: SEC-2006-0364-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-03-20T05:00Z

[Federal Register: March 20, 2006 (Volume 71, Number 53)]
[Notices]               
[Page 14043-14045]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20mr06-61]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53474; File No. SR-NASD-2006-022]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto Relating to Optional Routing of 
Orders in Nasdaq's INET Facility

March 13, 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 February 10, 2006, the National Association of Securities Dealers, 
Inc.(``NASD''), through its subsidiary, the Nasdaq Stock Market, Inc. 
(``Nasdaq''), submitted to the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by Nasdaq. Nasdaq filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ 
which renders it effective upon filing with the Commission. On March 9, 
2006, Nasdaq filed Amendment No. 1 to the proposed rule change.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, 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\ Amendment No. 1 made a non-substantive, clarifying change to 
the rule text, as well as provided rationale for the request for the 
Commission to accelerate the operative delay.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to create a new voluntary routing option for its 
INET facility that will allow INET users to instruct that orders being 
ultimately directed to the New York Stock Exchange or the American 
Stock Exchange first check INET and then the Nasdaq Market Center and/
or Nasdaq's Brut facility for potential execution before being 
delivered to those exchanges. Nasdaq will implement the proposed rule 
change immediately. The text of the proposed rule change is below. 
Proposed new language is in italics; deletions are in [brackets].\5\
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    \5\ Changes are marked to the rule text that appears in the 
electronic NASD Manual found at http://www.nasd.com. Prior to the date when 

The NASDAQ Stock Market LLC (``NASDAQ LLC'') commences operations, 
NASDAQ LLC will file a conforming change to the rules of NASDAQ LLC 
approved in Securities Exchange Act Release No. 53128 (January 13, 
2006).
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* * * * *

[[Page 14044]]

4956. Routing
(a) INET Order Routing Process
    (1) The INET Order Routing Process shall be available to 
Participants from 7 a.m. to 8 p.m. Eastern Time, and shall route orders 
as described below:
    (A) Exchange-Listed Routing Options
    The System provides [five] six routing options for orders in 
exchange-listed securities. Of these [five] six, only [two] three--DOT 
Immediate, [and] DOT Alternative and DOT Nasdaq--are available for 
orders ultimately sought to be directed to either the New York Stock 
Exchange (``NYSE'') or the American Stock Exchange (``AMEX''). The 
System also allows firms to send individual orders to the NYSE Direct + 
System, and to elect to have orders not be sent to the AMEX. The [five] 
six System routing options for NYSE and/or Amex listed orders are:
    (i)-(v) No Change.
    (vi) DOT Nasdaq (``DOTN'')--under this option, after checking the 
INET System for available shares, orders are sent to other available 
market centers that are owned by Nasdaq, including the Nasdaq Market 
Center and/or Nasdaq's Brut Facility for potential execution before the 
destination exchange. When checking the INET book, the System will seek 
to execute at the price it would send the order to a non-INET 
destination market center as designated by the entering party. Any un-
executed portion will thereafter be sent to the NYSE or AMEX, as 
appropriate, at the order's original limit order price. This option may 
only be used for orders with time-in-force parameters of either DAY, 
IOC, or market-on-open/close.
    (B)-(C) 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, Nasdaq 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. Nasdaq 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
    Nasdaq proposes to create a new voluntary routing option for its 
INET facility that will allow INET users to instruct that orders being 
ultimately directed to the New York Stock Exchange or the American 
Stock Exchange first check INET and then the Nasdaq Market Center and/
or Nasdaq's Brut facility for potential execution before being 
delivered to those exchanges. Nasdaq believes that the above option 
will enhance the choices available to INET systems users to select the 
best method to execute proprietary and customer orders across multiple 
trading venues, and is similar to routing options available through 
Nasdaq's Brut facility. In addition, this routing option will allow 
users to maximize their participation across Nasdaq-owned trading 
venues so as to take advantage of available volume-based execution fee 
discounts resulting from activity on all Nasdaq systems. Like all 
Nasdaq system routing options, applicable principles of best-execution 
apply to the use of this proposed routing option.
2. Statutory Basis
    Nasdaq believes that the proposed rule change, as amended, is 
consistent with Section 15A of the Act,\6\ in general, and furthers the 
objectives of Section 15A(b)(6) of the Act,\7\ in particular, in that 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, remove 
impediments to a free and open market and a national market system, 
and, in general, to protect investors and the public interest.
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    \6\ 15 U.S.C. 78o-3.
    \7\ 15 U.S.C. 78o-3(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq 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 on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Nasdaq has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \8\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\9\ Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) does not become operative for 30 days from the date of filing, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
and Rule 19b-4(f)(6) thereunder. As required under Rule 19b-
4(f)(6)(iii), Nasdaq provided the Commission with written notice of its 
intent to file the proposed rule change at least five business days 
prior to filing the proposal with the Commission or such shorter period 
as designated by the Commission. Nasdaq has requested that the 
Commission waive 30-day delayed operational date provisions contained 
in the above rule, based upon a representation that the proposed rule 
filing would benefit investors and permit them to select the execution 
venues that best suit their trading goals, and should, therefore, be 
provided to investors as soon as possible. For this reason, the 
Commission designates the proposal to be effective and operative upon 
filing with the Commission.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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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.\10\
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    \10\ The effective date of the original proposed rule change is 
February 10, 2006 and the effective date of Amendment No. 1 is March 
9, 2006. For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, as 
amended, under section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on March 9, 2006, the date on which 
Nasdaq submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with

[[Page 14045]]

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-2006-022 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-2006-022. 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 such 
filing also will be available for inspection and copying at the 
principal office of Nasdaq. 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-2006-022 and should be submitted on or before April 
10, 2006.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Nancy M. Morris,
Secretary.
[FR Doc. E6-3959 Filed 3-17-06; 8:45 am]

BILLING CODE 8010-01-P