Document ID: SEC-2005-0195-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2005-11-03T05:00Z

[Federal Register: November 3, 2005 (Volume 70, Number 212)]
[Notices]               
[Page 66875-66876]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03no05-92]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52679; File No. SR-NASD-2005-112]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change Relating to 
Amendments To Rule 3360 To Expand Short-Interest Reporting To OTC 
Equity Securities

October 26, 2005.
    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 September 20, 2005, the National Association of Securities Dealers, 
Inc. (``NASD'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by NASD. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend Rule 3360 to expand the short interest 
reporting requirements to over-the-counter (``OTC'') equity securities. 
Below is the text of the proposed rule change. Proposed new language is 
in italics; proposed deletions are in brackets.
* * * * *

3360  Short-Interest Reporting

    (a) Each member shall maintain a record of total ``short'' 
positions in all customer and proprietary firm accounts in OTC Equity 
Securities, securities included in The Nasdaq Stock Market, and in each 
other security listed on a registered national securities exchange and 
not otherwise reported to another self-regulatory organization and 
shall regularly report such information to NASD in such a manner as may 
be prescribed by NASD. [For the purposes of this rule, the term 
``customer'' includes a broker/dealer.] Reports shall be made as of the 
close of the settlement date designated by NASD. Reports shall be 
received by NASD no later than the second business day after the 
reporting settlement date designated by NASD.
    (b) For purposes of this Rule[,]:
    (1) ``short'' positions to be reported are those resulting from 
``short sales'' as that term is defined in SEC Rule 200 of Regulation 
SHO, with the exception of positions that meet the requirements of 
Subsections (e)(1), (6), (7), (8), and (10) of SEC Rule 10a-1 adopted 
under the Act[.];
    (2) the term ``customer'' includes a broker-dealer; and
    (3) the term ``OTC Equity Securities'' shall mean any equity 
security that is not listed on The Nasdaq Stock Market or a national 
securities exchange.
* * * * *

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 to amend Rule 3360, Short-Interest Reporting, to 
require that members maintain and report on a monthly basis total short 
positions in OTC equity securities in all customer and proprietary firm 
accounts.\3\ Currently, Rule 3360(a) requires members to maintain a 
record of total short positions \4\ in all customer\5\ and proprietary 
firm accounts in Nasdaq securities (and listed securities if not 
reported to another self-regulatory organization (``SRO'')) and 
requires members to report such information to

[[Page 66876]]

NASD on a monthly basis. NASD believes that expanding the monthly short 
interest reporting requirements to OTC equity securities will increase 
the information available to public investors and other interested 
parties related to trading in OTC equity securities. Accordingly, NASD 
proposes to amend Rule 3360(a) to require that members maintain and 
report to NASD short sale positions for OTC equity securities. For 
purposes of the proposed rule change, OTC equity securities would be 
defined as any equity security that is not listed on The Nasdaq Stock 
Market or a national securities exchange.
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    \3\ Non-self-clearing broker-dealers generally are considered to 
have satisfied their reporting requirement by making appropriate 
arrangements with their respective clearing organizations. See 
Notice to Members 03-08 (January 2003).
    \4\ Rule 3360(b) provides that short positions required to be 
reported under the rule are those resulting from short sales as the 
term is defined in SEC Rule 200 of Regulation SHO, with limited 
exceptions. SEC Rule 200 of Regulation SHO provides, in part, the 
following: ``The term `short sale' shall mean any sale of a security 
which the seller does not own or any sale which is consummated by 
the delivery of a security borrowed by, or for the account of, the 
seller.'' 17 CFR 242.200(a).
    \5\ Short sale positions held for other broker-dealers that fall 
within the definition of short position provided in Rule 3360(b) 
must be reported under Rule 3360(a), unless these positions already 
are reported to an SRO. See Notice to Members 03-08 (January 2003).
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    NASD will announce the effective date of the proposed rule change 
in a Notice to Members to be published no later than 60 days following 
Commission approval. In recognition of the technological and systems 
changes the proposed rule change may require, the effective date will 
be 90 days following publication of the Notice to Members announcing 
Commission approval.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\6\ which requires, among 
other things, that NASD rules must 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 
increase the information available to public investors and other 
interested parties related to trading in OTC equity securities.
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    \6\ 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.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    The Commission notes that the NASD is proposing an implementation 
period for proposed NASD Rule 3360. Specifically, the Commission notes 
that the NASD is proposing that it will announce the effective date of 
the proposed rule change in a Notice to Members to be published no 
later than 60 days following Commission approval and that the effective 
date of the proposed rule change will be 90 days following publication 
of the Notice to Members announcing Commission approval. The Commission 
specifically requests comment regarding whether this implementation 
period could be shorter.
    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-2005-112 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NASD-2005-112. 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, DC 20549. 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-2005-112 
and should be submitted on or before November 25, 2005.
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    \7\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
Jonathan G. Katz,
Secretary.
 [FR Doc. E5-6086 Filed 11-2-05; 8:45 am]

BILLING CODE 8010-01-P