Document ID: SEC-2006-1018-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-08-07T04:00Z

[Federal Register: August 7, 2006 (Volume 71, Number 151)]
[Notices]               
[Page 44749-44751]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07au06-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54258; File No. SR-NASD-2006-080]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto To Extend the Time for Non-
Member Broker/Dealers To Access the Brut and INET Facilities

August 1, 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 July 3, 2006, the National Association of Securities Dealers, Inc. 
(``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), 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 by Nasdaq. On July 5, 2006, 
Nasdaq filed Amendment No. 1 to the proposed rule change.\3\ Nasdaq 
filed the proposed rule change as a ``non-controversial'' rule change 
under Rule 19b-4(f)(6) under the Act,\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, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, Nasdaq revised the proposed rule text to 
conform it with the existing language of NASD Rule 4901.
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ Nasdaq has requested the Commission to waive the 30-day pre-
operative delay required by Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-
4(f)(6)(iii). See discussion infra Section III.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to continue the participation of broker/dealers 
that are non-NASD members in Nasdaq's Brut and INET systems through the 
earlier of September 1, 2006, or the date Nasdaq becomes operational as 
a national securities exchange for the particular types of securities 
traded by those non-members in Nasdaq's INET and Brut systems. The 
purpose of the proposed rule change is to allow the non-NASD member 
broker/dealers to have continued access to the Brut and INET systems 
while they take actions to become members of The NASDAQ Stock Market 
LLC (``Nasdaq Exchange'').\6\ Nasdaq would implement the proposed rule 
change immediately. The text of the proposed rule change is below. 
Proposed new language is in italics. Proposed deletions are in 
[brackets].
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    \6\ The Commission recently approved Nasdaq's application for 
one of its proposed subsidiaries, The NASDAQ Stock Market LLC, to be 
registered as a national securities exchange under Section 6 of the 
Act. See Securities Exchange Act Release No. 53128 (January 13, 
2006), 71 FR 3550 (January 23, 2006) (File No. 10-131).
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* * * * *

4901. Definitions

    Unless stated otherwise, the terms described below shall have the 
following meaning:
    (a) through (h) No change
    (i) The term ``Participant'' shall mean an NASD member that 
fulfills the obligations contained in Rule 4902 regarding participation 
in the System. The term ``Participant'' shall also include non-NASD 
broker/dealers that desire to use the System and otherwise meet all 
other requirements for System participation. Non-NASD member broker/
dealers shall have access to

[[Page 44750]]

System until the earlier of either [July] September 1, 2006, or the 
date that Nasdaq becomes operational as a national securities exchange 
for the particular class of securities traded by the non-NASD member.
    (j) through (w) No Change
* * * * *

4952. System Participant Registration

    (a) Participation in INET requires current registration with the 
System and is conditioned upon the Participant's initial and continuing 
compliance with the following requirements:
    (1)-(5) No Change.
    (6) In addition to the above, all System Participants shall be 
members of the Association. Exception: Non-NASD member broker/dealers 
shall have access to System until the earlier of either [July] 
September 1, 2006, or the date that Nasdaq becomes operational as a 
national securities exchange for the particular class of securities 
traded by the non-NASD member.
* * * * *

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 Exchange 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. Nasdaq 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, Proposed Rule Change

1. Purpose
    Nasdaq states that, under current rules, broker/dealers that are 
not members of the NASD may use the Brut and INET systems until July 1, 
2006. Nasdaq is proposing to modify this provision to allow non-NASD 
member broker/dealers to use the Brut and INET systems until the 
earlier of either September 1, 2006, or the date that Nasdaq becomes 
operational as a national securities exchange for the particular class 
of securities traded by the non-member. Nasdaq believes that this 
division of dates upon which non-NASD members must be members of the 
Nasdaq Exchange in order to continue to use Nasdaq's trading facilities 
is necessary because Nasdaq plans to become operational as a national 
securities exchange in two phases, with the first involving only Nasdaq 
securities and a second, subsequent phase involving securities listed 
by other national securities exchanges. Under the proposal, non-NASD 
members trading Nasdaq-listed securities would be required to be a 
Nasdaq Exchange member to continue to trade Nasdaq securities in Brut 
and INET on the date that Nasdaq becomes operational as a national 
securities exchange for Nasdaq issues, while entities trading other 
exchange-listed securities would be allowed continued access to the 
Brut and INET systems for such trading until such time as Nasdaq 
becomes operational as a national securities exchange for non-Nasdaq 
issues. Nasdaq states that in neither scenario would non-NASD member 
access to the Brut and INET systems extend beyond September 1, 2006 
without a further extension.
    Nasdaq states that this extension is intended to allow these non-
NASD member broker/dealers to have continued access to Brut and INET 
while they take actions to become members of the recently-approved 
Nasdaq Exchange. Nasdaq notes that only 44 non-NASD member broker/
dealers currently have access to its Brut and INET systems (4 in the 
Brut system and 40 in the INET system) and, as before, Nasdaq commits 
not to allow any additional non-NASD broker/dealers access during this 
extension period.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\7\ in general, and with 
Section 15A(b)(6) of the Act,\8\ in particular, in that it is designed 
to promote just and equitable principles of trade, and to remove 
impediments to a free and open market and a national market system.
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    \7\ 15 U.S.C. 78o-3.
    \8\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq 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

    Nasdaq states that written comments were neither solicited nor 
received with respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the 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) by its terms, become 
operative for thirty days from the date on which it was filed, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to thirty days after the date of filing.\11\ 
However, Rule 19b-4(f)(6)(iii) \12\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. Nasdaq has requested that the 
Commission waive the 30-day pre-operative delay and the five-day pre-
filing notice requirement and designate the proposed rule change to 
become effective upon filing. Nasdaq believes that waivers of such 
periods will allow continued uninterrupted access to the Brut and INET 
systems for non-member broker/dealers in the period of time immediately 
preceding Nasdaq's operation as a national securities exchange. The 
Commission believes that waiving the 30-day pre-operative delay and the 
five-day pre-filing notice requirement is consistent with the 
protection of investors and the public interest because it would 
facilitate the orderly transition of Nasdaq to become a national 
securities exchange, thus removing impediments to a free and open 
market and a national market system. In addition, the Commission 
believes that waiving the 30-day pre-operative delay is consistent with 
the protection of investors and the public interest because such waiver 
would allow non-NASD member broker/dealers to continue to participate 
in Brut and INET while they take actions to become members of the 
Nasdaq

[[Page 44751]]

Exchange. For the foregoing reasons, the Commission designates the 
proposal to become effective and operative immediately.\13\
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    \11\ See 17 CFR 240.19b-4(f)(6)(iii).
    \12\ Id.
    \13\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the impact of the 
proposed rule on efficiency, competition, and capital formation. See 
15 U.S.C. 78c(f).
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    At any time within sixty 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 the furtherance of the purposes of the Act.\14\
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    \14\ The effective date of the original proposed rule change is 
July 3, 2006, and the effective date of Amendment No. 1 is July 5, 
2006. For purposes of calculating the 60-day period within which the 
Commission may summarily abrogate the proposal, the Commission 
considers the period to commence on July 5, 2006, the date on which 
the Exchange submitted Amendment No. 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, as amended, 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-2006-080 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-2006-080. 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 Section, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of Nasdaq. 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-2006-080 and should be 
submitted on or before August 28, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-12739 Filed 8-4-06; 8:45 am]

BILLING CODE 8010-01-P