[Federal Register Volume 67, Number 197 (Thursday, October 10, 2002)]
[Notices]
[Pages 63182-63183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25746]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46585; File No. SR-NASD-2002-131]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc., To Extend the Pilot for the Operation of the
Short Sale Rule in a Decimals Environment
October 2, 2002.
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 26, 2002, the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association''), 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, II and III below, which Items have been prepared by Nasdaq.
Nasdaq filed the proposal pursuant to Section 19(b)(3)(A) of the
Act,\3\ and Rule 19b-4(f)(6) \4\ thereunder, which renders the proposal
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
Nasdaq proposes to extend through January 31, 2003, the penny
($0.01) legal short sale standard contained in NASD Interpretative
Material 3350 (``IM-3350''). Without such an extension this standard
would terminate on September 30, 2002. Nasdaq does not propose to make
any substantive changes to the pilot; the only change is an extension
of the pilot's expiration date through January 31, 2003. Nasdaq
requests that the Commission waive both the 5-day notice and 30-day
operative requirements contained in Rule 19b-4(f)(6)(iii) \5\ of the
Act. If such
[[Page 63183]]
waivers are granted by the Commission, Nasdaq will implement this rule
change immediately.
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\5\ 17 CFR 240.19b-4(f)(6)(iii).
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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, Nasdaq included statements
concerning the purpose of and basis for its proposal and discussed any
comments it received regarding the proposal. 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, the Proposed Rule Change
1. Purpose
On March 2, 2001, the Commission approved, on a one-year pilot
basis ending March 1, 2002,\6\ Nasdaq's proposal to establish a $0.01
above the bid standard for legal short sales in Nasdaq National Market
securities as part of the Decimals Implementation Plan for the Equities
and Options Markets. The pilot program has been continuously extended
since that date and is currently set to expire on September 30,
2002.\7\ Nasdaq now proposes to extend, through January 31, 2003, that
pilot program. Extension until January 31st, will allow Nasdaq and the
Commission to continue to evaluate the impact of the penny short sale
pilot and thereafter take action on Nasdaq's separate pending proposal
to make the penny short sale standard permanent.\8\ If approved, Nasdaq
would continue during the pilot period to require NASD members seeking
to effect ``legal'' short sales when the current best (inside) bid
displayed by Nasdaq is lower than the previous bid, to execute those
short sales at a price that is at least $0.01 above the current inside
bid in that security. Nasdaq believes that continuation of this pilot
standard appropriately takes into account the important investor
protections provided by the short sale rule and the ongoing
relationship of the valid short sale price amount to the minimum
quotation increment of the Nasdaq market (currently also $0.01).
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\6\ Securities Exchange Act Release No. 44030 (March 2, 2001),
66 FR 14235 (March 9, 2001).
\7\ Securities Exchange Act Release No. 45761 (April 16, 2002),
67 FR 19788 (April 23, 2002).
\8\ See SR-NASD 2002-09.
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2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of section 15A(b)(6) of the Act \9\ in that it is
designed to: (1) Promote just and equitable principles of trade; (2)
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to and
facilitating transactions in securities; (3) perfect the mechanism of a
free and open market and a national market system; and (4) protect
investors and the public interest.
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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
Nasdaq does not believe that the proposed rule change will impose
any inappropriate burden on competition.
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 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 \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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Nasdaq has requested that the Commission waive both the 5-day
notice and the 30-day operative delay. The Commission believes waiving
the 5-day notice and 30-day operative delay is consistent with the
protection of investors and the public interest. Acceleration of the
operative date will allow the pilot to continue uninterrupted through
January 31, 2003, and will provide Nasdaq and the Commission with an
opportunity to evaluate the impact of the penny short sale pilot. For
these reasons, the Commission designates the proposal to be effective
and operative upon filing with the Commission.\12\
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\12\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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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 proposal is
consistent with the Act. Persons making written submissions should file
six copies thereof with the Secretary, Securities and Exchange
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 will also be available for
inspection and copying at the principal office of Nasdaq. All
submissions should refer to file number SR-NASD-2002-131 and should be
submitted by October 31, 2002.
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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-25746 Filed 10-9-02; 8:45 am]
BILLING CODE 8010-01-P