Document ID: SEC-2007-1003-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-07-25T04:00Z

[Federal Register: July 25, 2007 (Volume 72, Number 142)]
[Notices]               
[Page 40918-40920]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25jy07-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56103; File No. SR-NASD-2007-039]

 
Self-Regulatory Organizations: National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Delay Implementation of Certain Changes to the Manning 
Rule

July 19, 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 June 20, 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, II 
and III below, which Items have been substantially prepared by NASD. 
NASD filed the proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders it 
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).
    \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

    NASD is proposing to delay implementation of certain NASD rule 
changes approved in SR-NASD-2005-146 until November 26, 2007.\5\ There 
are no new changes to the text of NASD rules. The text of the proposed 
rule change is available at NASD, http://www.nasd.com, and the 

Commission's Public Reference Room.
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    \5\ See Securities Exchange Act Release No. 55351 (February 26, 
2007), 72 FR 9810 (March 5, 2007) (order approving SR-NASD-2005-
146).
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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 February 26, 2007, the Commission approved SR-NASD-2005-146, 
which, among other clarifying and conforming changes, proposed 
amendments to NASD IM-2110-2 \6\ to (1) expand the scope to apply to 
OTC Equity Securities; \7\ (2) modify the minimum price-improvement 
standards for securities trading in decimals; (3) adopt on a permanent 
basis the pilot price-improvement standards for

[[Page 40919]]

securities trading in decimals; and (4) delete certain unnecessary text 
relating to the minimum price-improvement required for securities 
trading in fractions. On April 27, 2007, NASD published Notice to 
Members 07-19, which announced the Commission's approval of SR-NASD-
2005-146 and established July 26, 2007 as the effective date of the 
rule changes in SR-NASD-2005-146.\8\
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    \6\ Currently, NASD IM-2110-2 generally prohibits a member from 
trading for its own account in an exchange-listed security at a 
price that is equal to or better than an unexecuted customer limit 
order in that security, unless the member immediately thereafter 
executes the customer limit order at the price at which it traded 
for its own account or better. As part of SR-NASD-2005-146, NASD 
replaced the term ``exchange-listed security'' with the term ``NMS 
stock,'' which is defined as any NMS security other than an option. 
See Rule 600(b)(47) of Regulation NMS. Although the replacement of 
the term would not become effective until the November 26, 2007 
final implementation date, as stated in SR-NASD-2005-146, NASD IM-
2110-2 does not apply to options.
    \7\ See NASD Rule 6610(d) (definition of ``OTC Equity 
Security'').
    \8\ See NASD Notice to Members 07-19 (April 2007) (announcing 
the effective date of the rule changes in SR-NASD-2005-146).
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    Following Commission approval of SR-NASD-2005-146 and the 
publication of the Notice to Members, several firms have requested that 
the effective date of the approved rule changes be delayed to allow 
firms additional time to make necessary systems changes in light of 
other competing technological demands required by implementation of 
Regulation NMS. In addition, some broker-dealers raised concerns 
regarding the application of the approved minimum price-improvement 
standards. NASD staff is currently revisiting the amended price-
improvement standards in light of these concerns. If, based on this 
review, NASD concludes that further rulemaking is warranted, NASD will 
file a separate rule change with the Commission.
    Therefore, to provide adequate time to firms to make technological 
changes given competing technological demands from Regulation NMS, and 
to consider and potentially act upon the concerns regarding the minimum 
price-improvement standards, NASD is proposing that the effective date 
of certain NASD rule changes approved in SR-NASD-2005-146 as described 
herein be delayed until November 26, 2007. Specifically, NASD is 
proposing to delay the approved rule changes in SR-NASD-2005-146 that 
relate solely to the expansion of the scope of NASD IM-2110-2 to OTC 
Equity Securities and the related deletion of NASD Rule 6541. 
Accordingly, the requirements in NASD Rule 6541 would continue to apply 
to OTCBB securities until NASD IM-2110-2 is implemented for OTC Equity 
Securities.
    In addition, the amendments in SR-NASD-2005-146 also make changes 
to the minimum price-improvement standards in NASD IM-2110-2, which, as 
approved, would apply uniformly to both OTC Equity Securities and NMS 
stocks. NASD is delaying these changes as well, with one exception: For 
customer limit orders in exchange-listed securities priced less than 
$1.00 that are at or inside the best inside market, the minimum amount 
of price improvement required is the lesser of $0.01 or one-half (\1/
2\) of the current inside spread. This provision will go into effect on 
July 26, 2007, as currently scheduled.
    All other changes unrelated to the expansion to OTC Equity 
Securities, including the deletion of certain unnecessary text relating 
to the minimum price-improvement required for securities trading in 
fractions and the adoption on a permanent basis of the pilot price-
improvement standards for securities trading in decimals that were 
approved pursuant to SR-NASD-2005-146 will become effective as 
scheduled on July 26, 2007.
    NASD has filed the proposed rule change for immediate 
effectiveness. NASD proposes to implement the proposed rule change as 
described herein.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\9\ 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 believes that the proposed rule change will 
improve the treatment of customer limit orders and promote investor 
protection.
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    \9\ 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 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

    Because the foregoing proposed rule change 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 from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \10\ and 
Rule 19b-4(f)(6) thereunder.\11\ 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    In accordance with Rule 19b-4,\12\ NASD submitted written notice of 
its intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing.
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    \12\ 17 CFR 240.19b-4.
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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-2007-039 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-2007-039. 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, 100 F Street, NE., 
Washington,

[[Page 40920]]

DC 20549, on official business days between the hours of 10 a.m. and 3 
p.m. 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-2007-039 and should be submitted on 
or before August 15, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-14359 Filed 7-24-07; 8:45 am]

BILLING CODE 8010-01-P