Document ID: SEC-2006-1241-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-09-25T04:00Z

[Federal Register: September 25, 2006 (Volume 71, Number 185)]
[Notices]               
[Page 55814-55816]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25se06-55]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54463; File No. SR-NASD-2006-100]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Delivery of Options Disclosure Documents

September 15, 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 17, 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, II 
and III below, which Items have been prepared by NASD. NASD filed the 
proposed rule change as a ``non-controversial'' rule change under Rule 
19b-4(f)(6) under the Act,\3\ which rendered 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\ 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 Rule 2860 (Options) to (1) require that 
a copy of each amendment to the options disclosure document, 
Characteristics and Risks of Standardized Options (``ODD''), be 
distributed to each customer not later than the time of the delivery of 
a confirmation of a transaction in the category of options issued by 
The Options Clearing Corporation (``OCC'') to which the amendment 
pertains and (2) clarify that

[[Page 55815]]

revisions to the Special Statement for Uncovered Option Writers 
(``Special Written Statement'') be distributed to each customer 
approved for writing uncovered short options not later than the time of 
the delivery of a confirmation of a transaction in options issued by 
the OCC. The text of the proposed rule change is available on NASD's 
Web site, http://www.nasd.com, at NASD's Office of the Secretary, and 

at the Commission's Public Reference Room.

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 is proposing revisions to the requirement to deliver 
amendments and/or revisions to the options disclosure documents in NASD 
Rule 2860 to conform to similar rules of other self-regulatory 
organizations.\4\ Specifically, NASD is amending the rule to more 
clearly delineate the particular delivery requirements applicable to 
the ODD and the Special Written Statement.
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    \4\ See CBOE Rule 9.15; ISE Rule 616; Phlx Rule 1029; Amex Rule 
926; and NYSE Rule 726 (collectively, ``Options Exchanges'').
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    Currently, NASD Rule 2860(b)(11)(A) requires that amendments and 
revisions to both disclosure documents be distributed to each customer 
not later than the time a confirmation of a transaction is delivered to 
each customer who enters into a transaction in options issued by the 
OCC. By contrast, the rules of the Options Exchanges require that 
amendments to the ODD be distributed to each customer not later than 
the time a confirmation of a transaction in the category of options to 
which the amendment pertains is delivered to such customer.
    NASD believes that the delivery of an amendment to the ODD is 
appropriately triggered by a customer transaction in an options 
contract to which such amendment pertains. Furthermore, the proposed 
rule change will harmonize NASD's rule for amendments to the ODD with 
those of the Options Exchanges.
    In addition, through a new subparagraph (2), NASD is clarifying 
that revisions to the Special Written Statement be distributed to each 
customer having an account approved for writing uncovered short options 
not later than the time a confirmation of a transaction is delivered to 
each customer who enters into a transaction in options issued by the 
OCC. NASD states that the rules of the Options Exchanges do not address 
delivery of revisions to the Special Written Statement.
    NASD has filed the proposed rule change for immediate 
effectiveness. NASD will announce the implementation date of the 
proposed rule change in a Notice to Members to be published no later 
than 60 days following the filing of the rule change with the 
Commission for immediate effectiveness. The implementation date will be 
30 days after the date of the Notice to Members.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with 
Section 15A(b)(6) \5\ of the Act in that it is 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 is proposing the rule change to harmonize 
NASD's rule for delivery of amendments to the ODD with those of the 
Options Exchanges and to clarify members' delivery obligations for 
revisions to the Special Written Statement.
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    \5\ 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 will impose 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

    NASD has neither solicited nor received written comments on the 
proposed rule change.

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

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) by its terms, 
does not 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 has become effective pursuant to Section 19(b)(3)(A) of the Act 
\6\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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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.\8\
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    \8\ 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 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-2006-100 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-2006-100. 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

[[Page 55816]]

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 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-2006-100 and should be 
submitted on or before October 16, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. 06-8141 Filed 9-22-06; 8:45 am]

BILLING CODE 8010-01-P