Document ID: SEC-2007-0353-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-03-09T05:00Z

[Federal Register: March 9, 2007 (Volume 72, Number 46)]
[Notices]               
[Page 10805-10807]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09mr07-139]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55393; File No. SR-NASD-2007-016]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend NASD Rules 4632C and 4632D To Reflect ``As/Of'' 
Trade Reporting and the Automated Reporting of Trade Cancellations to 
the NASD/NSX and NASD/BSE Trade Reporting Facilities

March 2, 2007.
    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 27, 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 prepared substantially by the NASD. The 
NASD has filed this proposal pursuant to Section 19(b)(3)(A)(iii) of 
the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission.\5\ The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The NASD has asked the Commission to waive the 30-day 
operative delay provided in Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-
4(f)(6)(iii).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD proposes to amend NASD Rules 4632C, ``Transaction 
Reporting,'' and 4632D, ``Transaction Reporting,'' to reflect ``as/of'' 
(T+1) trade reporting and the automated reporting of trade 
cancellations to the NASD/NSX Trade Reporting Facility (the ``NASD/NSX 
TRF'') and the NASD/BSE Trade Reporting Facility (the ``NASD/BSE 
TRF''), respectively. The proposed amendments are substantially 
identical to the current language of NASD Rule 4632, ``Transaction 
Reporting,'' relating to the NASD/Nasdaq Trade Reporting Facility 
(``NASD/Nasdaq TRF''), which the Commission approved on June 30, 
2006.\6\ The text of the proposed rule change is available at the NASD, 
in the Commission's Public Reference Room, and at http://www.nasd.com.

---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 54084 (June 30, 
2006), 71 FR 38935 (July 10, 2006) (order approving File No. SR-
NASD-2005-087).
---------------------------------------------------------------------------

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 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. The 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
    The Commission approved the establishment of the NASD/NSX TRF \7\ 
and the NASD/BSE TRF \8\ on November 6, 2006, and December 13, 2006, 
respectively. The NASD/NSX TRF and NASD/BSE TRF provide members with 
additional mechanisms for reporting locked-in trades in exchange-listed 
securities executed otherwise than on an exchange.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 54715 (November 6, 
2006), 71 FR 66354 (November 14, 2006) (order approving File No. SR-
NASD-2006-108). The NASD/NSX TRF commenced operation for the 
reporting of over-the-counter (``OTC'') trades in Nasdaq-listed 
securities on November 27, 2006, and began accepting reports of OTC 
trades in non-Nasdaq exchange-listed securities on February 20, 
2007.
    \8\ See Securities Exchange Act Release No. 54931 (December 13, 
2006), 71 FR 76409 (December 20, 2006) (order approving File No. SR-
NASD-2006-115). The NASD/BSE TRF will commence operation upon 
successful completion of system testing and certification (currently 
anticipated to be in the first quarter of 2007).
---------------------------------------------------------------------------

    Currently, the NASD/NSX TRF does not accept reports of trades on an 
``as/of'' or next day (T+1) basis and the NASD/BSE TRF rules also do 
not contemplate the submission of ``as/of'' trade reports. The rules 
relating to the NASD/NSX TRF and the NASD/BSE TRF expressly provide 
that members must use an alternative electronic

[[Page 10806]]

mechanism to report ``as/of'' trades to the NASD.\9\
---------------------------------------------------------------------------

    \9\ See NASD Rule 4632C(a)(2)(B) and (D), relating to the NASD/
NSX TRF, and NASD Rule 4632D(a)(2)(B) and (D), relating to the NASD/
BSE TRF.
---------------------------------------------------------------------------

    In addition, members can only electronically report trade 
cancellations to the NASD/NSX TRF on trade date; members cannot 
electronically report cancellations on an ``as/of'' basis. The rules 
require that for trades that are cancelled after the day of the 
execution of the trade, members must contact NASD/NSX TRF Operations to 
report the trade cancellation.\10\ With respect to the NASD/BSE TRF, 
members cannot electronically report any trade cancellations, 
irrespective of whether they occur on or after the trade date. The 
NASD/BSE TRF rules require members to contact NASD/BSE TRF Operations 
to report any cancellation of a trade previously submitted to the NASD/
BSE TRF.\11\
---------------------------------------------------------------------------

    \10\ See NASD Rule 4632C(f)(2)(B), (C), (E), and (F).
    \11\ See NASD Rule 4632D(g)(2)(A), (B), (C), (D), (E), and (F).
---------------------------------------------------------------------------

    The NASD proposes to amend NASD Rules 4632C and 4632D to reflect a 
change in the functionality of the NASD/NSX TRF and NASD/BSE TRF, 
respectively, to support the reporting of trades on an ``as/of'' (T+1) 
basis and the automated reporting of trade cancellations. The NASD 
believes that by providing for the reporting of ``as/of'' trades, the 
proposed rule change will enhance transparency and the integrity of the 
audit trail. Additionally, the NASD believes that by automating the 
reporting of trade cancellations, the proposed rule change will 
facilitate and streamline the correction of trades, as necessary.
    The NASD anticipates that system testing and certification will be 
completed before the end of the first quarter of 2007. The NASD will 
announce the date that the system changes will be implemented on its 
Web site.
2. Statutory Basis
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act,\12\ which requires, 
among other things, that the NASD's 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. The NASD believes that the proposed rule 
change will enhance investor protection by increasing transparency and 
the integrity of the audit trail.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The 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.

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 NASD has designated the proposed rule change as one that: (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 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. In 
addition, as required under Rule 19b-4(f)(6)(iii),\13\ the NASD 
provided the Commission with written notice of its intention to file 
the proposed rule change, along with a brief description and the text 
of the proposed rule change, at least five business days prior to 
filing the proposal with the Commission. Therefore, the foregoing rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\14\ and Rule 19b-4(f)(6) thereunder.\15\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    Pursuant to Rule 19b-4(f)(6)(iii) under the Act, a proposal does 
not become operative for 30 days after the date of its filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest. The NASD has asked the 
Commission to waive the 30-day operative delay to allow the proposed 
rule changes to be operative when the system changes for ``as/of'' 
trade reporting and the automated reporting of trade cancellations have 
been completed. The NASD believes that these system changes may be 
completed prior to the end of the 30-day operative delay period, and 
that it is crucial for a complete and accurate audit trail and market 
transparency that the NASD/NSX TRF and the NASD/BSE TRF be able to 
process and report trade corrections as quickly as possible. The NASD 
believes that a delay in the implementation of this functionality would 
not be in the interests of investors.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the proposed changes could enhance the accuracy and integrity 
of the audit trail and facilitate the reporting of ``as/of'' trades and 
trade cancellations.\16\ The Commission also notes that the proposed 
changes are substantially identical to the current language of NASD 
Rule 4632 relating to the NASD/Nasdaq TRF, which was subject to notice 
and comment.\17\ Accordingly, the Commission waives the 30-day 
operative delay and designates that the proposal become operative 
immediately.
---------------------------------------------------------------------------

    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \17\ See supra note 6.
---------------------------------------------------------------------------

    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-2007-016 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 No. SR-NASD-2007-016. 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

[[Page 10807]]

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 the 
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 No. SR-NASD-
2007-016 and should be submitted on or before March 30, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-4185 Filed 3-8-07; 8:45 am]

BILLING CODE 8010-01-P