Document ID: SEC-2006-0677-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-05-25T04:00Z

[Federal Register: May 25, 2006 (Volume 71, Number 101)]
[Notices]               
[Page 30209-30211]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25my06-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53838; File No. SR-NASD-2006-059]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change and Amendment No. 1 Thereto Related to Non-NASD 
Member Broker/Dealer Access to Nasdaq's Brut and INET Facilities

May 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 May 1, 2006, the National Association of Securities Dealers, Inc. 
(``NASD''), through its subsidiary, the Nasdaq Stock Market, Inc. 
(``Nasdaq''), 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 Nasdaq. On May 16, 2006, 
Nasdaq submitted Amendment No. 1 to the proposed rule change.\3\ Nasdaq 
filed the proposed rule change, as amended, as a ``non-controversial'' 
rule change under Rule 19b-4(f)(6) under the Act,\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, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange clarified in the purpose 
section the number of non-member broker-dealers with access to the 
Brut and INET systems. In addition, Nasdaq requested waivers of the 
5-day notice and 30-day pre-operative delay contained in Rule 19b-
4(f)(6)(iii) under the Act.
    \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

    Nasdaq proposes to continue the participation of broker-dealers 
that are non-NASD members in Nasdaq's Brut and INET systems through the 
earlier of July 1, 2006, or the date Nasdaq becomes operational as a 
national securities exchange for the particular types of securities 
traded by those non-members in Nasdaq's INET and Brut systems. Nasdaq 
would implement the proposed rule change immediately. The text of the 
proposed rule change is below. Proposed new language is in italics. 
Proposed deletions are in [brackets].
4901. Definitions
    (a) through (h) No change.
    (i) The term ``Participant'' shall mean an NASD member that 
fulfills the obligations contained in Rule 4902 regarding participation 
in the System. [Until May 1, 2006] [t]The term ``Participant'' shall 
also include non-NASD broker/dealers that desire to use the System and 
otherwise meet all other requirements for System participation. Non-
NASD member broker/dealers shall have access to System until the 
earlier of either July 1, 2006, or the date that Nasdaq becomes 
operational as a national securities exchange for the particular class 
of securities traded by the non-NASD member.
    (j) through (w) No Change
* * * * *
4952. System Participant Registration
    (a) Participation in INET requires current registration with the 
System and is conditioned upon the Participant's

[[Page 30210]]

initial and continuing compliance with the following requirements:
    (1)-(5) No Change.
    (6) In addition to the above, [on or before May 1, 2006,] all 
System Participants shall be members of the Association. Exception: 
Non-NASD member broker/dealers shall have access to System until the 
earlier of either July 1, 2006, or the date that Nasdaq becomes 
operational as a national securities exchange for the particular class 
of securities traded by the non-NASD member.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change, as 
amended, and discussed any comments it received on the proposed rule 
change, as amended. 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, Proposed Rule Change

1. Purpose
    Nasdaq states that, under current rules, broker-dealers that are 
not members of the NASD may use the Brut and INET systems until May 1, 
2006. Nasdaq is proposing to modify this provision so as to allow non-
NASD member broker-dealers to use the Brut and INET systems until the 
earlier of either July 1, 2006, or the date that Nasdaq becomes 
operational as a national securities exchange for the particular class 
of securities traded by the non-member. Nasdaq believes that this 
division of dates upon which non-NASD members must be members of the 
Nasdaq exchange in order to continue to use Nasdaq's trading facilities 
is necessary because Nasdaq plans to become operational as an exchange 
in two phases with the first involving only Nasdaq securities, with a 
second later phase for securities listed by other exchanges. Under the 
proposal, non-NASD members trading Nasdaq-listed securities would be 
required to be a Nasdaq exchange member to continue to trade Nasdaq 
securities in Brut and INET on the date that Nasdaq becomes operational 
as exchange for Nasdaq issues, while entities trading other exchange-
listed securities would be allowed continued access to the Brut and 
INET systems for that trading until such time as Nasdaq becomes 
operational as an exchange for non-Nasdaq issues. Nasdaq states that in 
neither scenario would non-NASD member access to the Brut and INET 
systems extend beyond July 1, 2006 without a further Commission-
approved extension.
    Nasdaq states that this extension is intended to allow these non-
NASD member broker-dealers to have continued access to Brut and INET 
while they take actions to become members of the recently-approved 
Nasdaq exchange. Nasdaq notes that only 44 non-NASD member broker 
dealers currently have access to its Brut and INET systems (4 in the 
Brut system and 40 in the INET system) and, as before, Nasdaq commits 
not to allow any additional non-NASD broker-dealers access during this 
extension period.\5\
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    \5\ See Amendment No. 1, supra note 3.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change, as amended, is 
consistent with the provisions of Section 15A of the Act,\6\ in 
general, and with Section 15A(b)(5) of the Act,\7\ in particular, in 
that it is designed to promote just and equitable principles of trade, 
and to remove impediments to a free and open market and a national 
market system.
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    \6\ 15 U.S.C. 78o-3.
    \7\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change, as amended, 
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

    Nasdaq states that written comments were neither solicited nor 
received with respect to the proposed rule change, as amended.

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

    Because the proposed rule change, as amended, 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 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), the proposed rule change, as 
amended, has become effective pursuant to Section 19(b)(3)(A) of the 
Act \8\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
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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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    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. Nasdaq 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. Nasdaq believes that waivers 
of such periods will allow continued uninterrupted access to the Brut 
and INET systems for non-NASD broker dealers in the period of time 
immediately preceding Nasdaq's operation as an exchange. 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 would facilitate the 
orderly transition of Nasdaq to a national securities exchange, thus 
removing impediments to a free and open market and a national market 
system. For the reasons stated above, the Commission designates the 
proposal, as amended, to become effective and operative on May 1, 
2006.\12\
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    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ Id.
    \12\ 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 the furtherance of the purposes of the Act.\13\
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    \13\ The effective date of the original proposed rule change is 
May 1, 2006, and the effective date of Amendment No. 1 is May 16, 
2006. 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 May 16, 2006, the date on which 
the Exchange submitted Amendment No. 1.

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[[Page 30211]]

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 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-2006-059 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-2006-059. 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 Section, 100 F Street, 
NE., Washington, DC 20549. 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-2006-059 and should be 
submitted on or before June 15, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-7996 Filed 5-24-06; 8:45 am]

BILLING CODE 8010-01-P