Document ID: SEC-2006-0117-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-01-31T05:00Z

[Federal Register: January 31, 2006 (Volume 71, Number 20)]
[Notices]               
[Page 5097-5098]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31ja06-81]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53149; File No. SR-NASD-2006-003]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Guidance Regarding Firms' Obligations Under 
NASD Rule 2111 Regarding Market Order Protection

January 19, 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 January 6, 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 has 
designated the proposed rule change as ``constituting a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule'' under Section 
19(b)(3)(A)(i) of the Act \3\ and Rule 19b-4(f)(1) 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)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is filing with the Commission Notice to Members (``NTM'') 06-
03, which provides guidance regarding the application of new NASD Rule 
2111 prohibiting members from trading ahead of customer market orders 
under certain circumstances.
    No changes to the text of NASD rules are required by this proposed 
rule 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, 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
    On August 9, 2005, the Commission approved new NASD Rule 2111, 
Trading Ahead of Customer Market Orders, which, among other things, 
prohibits a firm that accepts and holds a customer market order from 
trading for its own account at prices that would satisfy the customer 
market order, unless the firm immediately thereafter executes the 
customer market order.\5\ On October 10, 2005, NASD issued NTM 05-69 
informing firms of Commission approval of new Rule 2111 and the January 
9, 2006 effective date of the new rule.\6\ NTM 05-69 also informed 
firms that NASD would be publishing a separate NTM providing guidance 
regarding the application of Rule 2111. In NTM 06-03, NASD staff is, 
among other things, publishing questions and answers regarding the 
application of the new rule to assist members in their implementation.
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    \5\ See Securities Exchange Act Release No. 52226 (August 9, 
2005), 70 FR 48219 (August 16, 2005) (SR-NASD-2004-045).
    \6\ See NASD NTM 05-69 (October 2005).
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    NASD is filing the proposed rule change for immediate effectiveness 
as a stated policy, practice, or interpretation with respect to the 
meaning, administration, or enforcement of an existing rule of NASD. 
The compliance date of the proposed rule change will be January 9, 
2006, which will coincide with the compliance date for Rule 2111.
 2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act, 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

[[Page 5098]]

believes that the proposed rule change will clarify the application of 
market orders under Rule 2111 and enhance the integrity of the market.

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, as amended.

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 proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act \7\ and Rule 19b-4(f)(1) thereunder,\8\ in 
that the proposed rule change constitutes a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule of NASD. The compliance date of the 
proposed rule change will be January 9, 2006, which will coincide with 
the compliance date for Rule 2111.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(i).
    \8\ 17 CFR 240.19b-4(f)(1).
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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 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-2006-003 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 20549-9303.
    All submissions should refer to File Number SR-NASD-2006-003. 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 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 the File Number SR-NASD-2006-
003 and should be submitted on or before February 21, 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. E6-1175 Filed 1-30-06; 8:45 am]

BILLING CODE 8010-01-P