Document ID: SEC-2006-1522-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-11-27T05:00Z

[Federal Register: November 27, 2006 (Volume 71, Number 227)]
[Notices]               
[Page 68665-68667]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27no06-139]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54773; File No. SR-NASD-2006-120]

 
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 Hours of 
Operation of the NASD/Nasdaq TRF, the OTC Reporting Facility and the 
Trade Reporting of Non-Nasdaq Exchange-Listed Securities Under the NASD 
Rule 6400 Series

November 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 October 27, 2006, 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 prepared by NASD. On 
November 3, 2006, NASD filed Amendment No. 1. 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. \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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ For purposes of calculating the 60-day abrogation period, 
the Commission considers the period to have commenced on November 3, 
2006, the date NASD filed Amendment No. 1.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD proposes to extend the hours of operation of (1) the Trade 
Reporting Facility established by NASD and the Nasdaq Stock Market, 
Inc. (``NASD/Nasdaq TRF''); \6\ (2) the trade reporting of non-Nasdaq 
exchange-listed securities under the NASD Rule 6400 Series; and (3) the 
trade reporting of OTC Equity Securities to the OTC Reporting Facility 
(``ORF'') \7\ under the NASD Rule 6600 Series, until 8 p.m. Eastern 
Time (``ET''). The text of the proposed rule change is available at 
NASD, on the NASD Web site at http://www.nasd.com, and at the 

Commission's Public Reference Room. \8\
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    \6\ During the initial transitional period, the NASD/Nasdaq TRF 
is used to report transactions executed otherwise than on an 
exchange in all Nasdaq Global Market, Nasdaq Capital Market 
securities and convertible bonds listed on Nasdaq. See NASD Rule 
4000 Series and 6100 Series. NASD filed a separate proposed rule 
change to expand the scope of the NASD/Nasdaq TRF rules to include 
trade reporting in non-Nasdaq exchange-listed securities. See 
Securities Exchange Act Release No. 54451 (September 15, 2006), 71 
FR 55243 (September 21, 2006) (SR-NASD-2006-104).
    \7\ For purposes of the NASD Rule 6600 Series, the ORF is the 
service provided by NASD that accommodates reporting and 
dissemination of last sale reports in OTC Equity Securities. 
Regarding those OTC Equity Securities that are not eligible for 
clearance and settlement through the facilities of the National 
Securities Clearing Corporation, the ORF comparison function is not 
available. However, the ORF supports the entry and dissemination of 
last sale data on such securities. See NASD Rule 6610(k).
    \8\ NASD has proposed changes to NASD Rule 4623(e), among other 
NASD rules, in SR-NASD-2006-104, which is currently pending at the 
Commission. See Securities Exchange Act Release No. 54451 (September 
15, 2006), 71 FR 55243 (September 21, 2006). Those proposed changes 
include the insertion of ``NASD/Nasdaq'' before each reference to 
the Trade Reporting Facility in NASD Rule 4632, which also is 
reflected in the proposed rule text. Further, the Commission has 
approved changes to NASD Rules 4632(e), 6420(e) and 6620(e) in SR-
NASD-2006-055, which becomes effective on December 1, 2006. See 
Securities Exchange Act Release No. 53977 (June 12, 2006), 71 FR 
34976 (June 16, 2006) (SR-NASD-2006-055) (approval order). Lastly, 
the Commission also has approved changes to NASD Rule 6420, among 
others, in SR-NASD-2006-091, which is scheduled to become effective 
on February 5, 2007. See Securities Exchange Act Release No. 54537 
(September 28, 2006), 71 FR 59173 (October 6, 2006). Upon the 
implementation of SR-NASD-2006-091, the requirements in NASD Rule 
6420, among others, will no longer be necessary as they will be 
incorporated directly into NASD's Alternative Display Facility 
rules.
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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

[[Page 68666]]

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 June 30, 2006, the Commission approved SR-NASD-2005-087, which 
amended certain NASD rules to reflect separation of the Nasdaq Stock 
Market, Inc. from NASD upon the operation of the Nasdaq Stock Market 
LLC as a national securities exchange.\9\ As part of SR-NASD-2005-087, 
the Commission approved the establishment of, and rules governing, the 
NASD/Nasdaq TRF, which currently provides members another mechanism for 
reporting transactions in Nasdaq-listed securities effected otherwise 
than on an exchange.\10\
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    \9\ See Securities Exchange Act Release No. 54084 (June 30, 
2006), 71 FR 38935 (July 10, 2006).
    \10\ See supra note 6.
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    Pursuant to the NASD Rule 6600 Series, members use the ORF for 
purposes of reporting transactions in OTC Equity Securities to 
NASD.\11\ In addition, pursuant to the NASD Rule 6400 Series, members 
report over-the-counter trades for non-Nasdaq exchange-listed 
securities to NASD. Nasdaq's Automated Confirmation Transaction Service 
(``ACT'') is the system used for each of these purposes.
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    \11\ NASD Rule 6610(d) defines ``OTC Equity Securities'' as any 
non-exchange-listed security and certain exchange-listed securities 
that do not otherwise qualify for real-time trade reporting.
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    Currently, the NASD/Nasdaq TRF trade reporting rules reflect a 
system closing time of 6:30 p.m. ET, which was consistent with the 
system closing time of the UTP Securities Information Processor (``UTP 
SIP''). Effective September 18, 2006, the UTP SIP system closing time 
was extended from 6:30 p.m. ET to 8 p.m. ET. To accommodate the 
extended UTP SIP system closing time, NASD proposes to extend the 
closing time of the NASD/Nasdaq TRF from 6:30 p.m. to 8 p.m. ET. In 
addition, to keep the hours of operation uniform across the ACT system, 
NASD proposes to extend the closing time to 8 p.m. for reporting OTC 
Equity Securities under NASD Rule 6600 and non-Nasdaq exchange-listed 
securities under NASD Rule 6400.
    Finally, the text of NASD Rule 6920 incorrectly reflects a system 
closing time of 5:15 p.m. ET. This closing time should have been 
amended at the time that the other NASD trade reporting rules were 
amended to reflect a system closing time of 6:30 p.m. Accordingly, as 
part of this proposed rule change, NASD also proposes to amend NASD 
Rule 6920 to extend the time from 5:15 p.m. until 8 p.m., the closing 
time of the ORF.
    NASD filed the instant proposed rule change for immediate 
effectiveness. NASD proposes to make the proposed rule change operative 
on December 4, 2006. To ensure that market participants have sufficient 
time to program their internal systems to accommodate a new closing 
time of 8 p.m. ET for the NASD/Nasdaq TRF and ORF, the extended closing 
time was announced in a Nasdaq Head Trader Alert on August 23, 
2006.\12\
    Extension of the system hours for the NASD/Nasdaq TRF and ORF will 
allow market participants to timely report more trades taking place 
after normal market hours. NASD believes that the proposed effective 
date draws an appropriate balance between the benefits of expanded 
access to the NASD/Nasdaq TRF and ORF systems with the needs of market 
participants to prepare for it.
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    \12\ See Nasdaq Head Trader Alert 2006-120 (August 23, 2006) 
(available at http://www.nasdaqtrader.com).

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2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A of the Act,\13\ in general, and with Section 
15A(b)(6) of the Act,\14\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, remove impediments to a free and 
open market and a national market system, and, in general, to protect 
investors and the public interest. NASD believes that the proposed rule 
change will afford market participants additional time to report trades 
taking place after normal market hours, resulting in more timely and 
accurate trade reporting, which in turn will result in greater 
transparency.
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    \13\ 15 U.S.C. 78o-3.
    \14\ 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

    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 \15\ and 
Rule 19b-4(f)(6) thereunder.\16\ 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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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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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-2006-120 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-2006-120. 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

[[Page 68667]]

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 Number SR-NASD-2006-120 and should be 
submitted on or before December 18, 2006.

For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-19966 Filed 11-24-06; 8:45 am]

BILLING CODE 8011-01-P