Document ID: SEC-2006-0657-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-05-23T04:00Z

[Federal Register: May 23, 2006 (Volume 71, Number 99)]
[Notices]               
[Page 29695-29697]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23my06-93]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53818; File No. SR-NASD-2006-062]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Reflect the Revised Effective Date of Certain Amendments 
to NASD's Order Audit Trail System Rules

May 17, 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 May 15, 2006, 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. 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 receipt of this 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 proposing to amend Rule 6957(c) to reflect July 10, 2006 as 
the effective date for the Order Audit Trail System (``OATS'') 
reporting requirements for manual orders on an immediately effective 
basis.\5\

[[Page 29696]]

    Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in [brackets].\6\
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    \5\ The SEC recently approved amendments to the NASD Rule 6950 
Series (``OATS Rules'') relating to OATS. See Securities Exchange 
Act Release No. 52521 (September 28, 2005), 70 FR 57909 (October 4, 
2005). See also Notice to Members 05-78 (November 2005). NASD 
recently filed a proposed rule change for immediate effectiveness 
that extends the effective date of these amendments to the OATS 
Rules until July 10, 2006. See SR-NASD-2006-052. See also Notice to 
Members 06-17 (April 2006).
    \6\ In addition, the instant filing is proposing changes to the 
current text of NASD Rule 6957 to accurately reflect the 
requirements of the rule that will be in effect beginning July 10, 
2006. See supra note 5. As part of SR-NASD-2006-052, NASD is 
amending NASD Rule 6957(c) to make it identical to the proposed 
changes in this filing.
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* * * * *
6950. Order Audit Trail System
* * * * *
6957. Effective Date
    The requirements of the Order Audit Trail System shall be effective 
in accordance with the following schedule:
    (a) and (b) No Change.
    (c) Manual Orders
    The requirements of the Order Audit Trail System shall be effective 
on July 10, 2006 [120 days after SEC approval of SR-NASD-00-23,] for 
all manual orders, provided that firms shall be required to report 
information item (18) specified in Rule 6954(b) only to the extent such 
item is available to them [and shall not be required to record and 
report information items (4) and (5) specified in Rule 6954(b) and 
information item (1) specified in Rule 6954(c)].
    (d) No 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
    NASD is proposing to amend NASD Rule 6957(c) to reflect July 10, 
2006 as the effective date for the OATS reporting requirements for 
manual orders. On September 28, 2005, the SEC approved amendments to 
the OATS Rules which, among other things,\7\ implement the OATS 
reporting requirements for manual orders.\8\ On April 20, 2006, NASD 
filed a proposed rule change for immediate effectiveness that extends 
the effective date of these recent amendments to the OATS Rules until 
July 10, 2006.\9\ In doing so, NASD, among other things, amended NASD 
Rule 6957(c) relating to the effective date for manual orders to 
reflect the revised effective date.
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    \7\ These amendments to the OATS Rules also: (1) Provide that 
members are required to capture and report the time the order is 
received by the member from the customer for all orders; (2) expand 
the order transmittal requirements to include orders routed to a 
member's trading desk or trading department; (3) exclude certain 
members from the definition of ``Reporting Member'' for those orders 
that meet specified conditions and are recorded and reported to OATS 
by another member; and (4) permit NASD to grant exemptive relief 
from the OATS requirements in certain circumstances to members that 
meet specified criteria. In SR-NASD-2006-052, NASD revised the 
effective date of these amendments to the OATS Rules to July 10, 
2006. See SR-NASD-2006-052. See also Notice to Members 06-17 (April 
2006).
    \8\ See supra note 5.
    \9\ Id.
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    Because these changes to NASD Rule 6957(c) will not be incorporated 
into the NASD manual until July 10, 2006, NASD is proposing to amend 
NASD Rule 6957(c) to reflect the new implementation date on an 
immediately effective basis and make the effective date of the OATS 
requirements for manual orders transparent in the current version of 
the NASD Rules.\10\
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    \10\ NASD also is proposing to amend the rule text to reflect 
certain technical amendments to NASD Rule 6957(c) to clarify that 
the OATS order information required under NASD Rules 6954(b)(4) and 
(5) and the OATS transmittal requirements under NASD Rule 6951(c)(1) 
apply to manual orders. These technical amendments were approved by 
Commission in SR-NASD-00-23. See Securities Exchange Act Release No. 
52521 (September 28, 2005), 70 FR 57909 (October 4, 2005).
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2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(6) of the Act,\11\ 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 
provide transparency regarding the effective date of the OATS reporting 
requirements for manual orders.
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    \11\ 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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \12\ and paragraph (f)(1) of Rule 19b-4 
thereunder,\13\ 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. 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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(1).
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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-2006-062 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-2006-062. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your

[[Page 29697]]

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 File No. SR-NASD-2006-062 and should be 
submitted on or before June 13, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-7816 Filed 5-22-06; 8:45 am]

BILLING CODE 8010-01-P