[Federal Register Volume 67, Number 47 (Monday, March 11, 2002)]
[Notices]
[Pages 10948-10949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5780]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45504 ; File No. SR-NASD-2002-30]


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

March 5,2002.
    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 March 1, 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 April 15,2002, 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 March 1, 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 April 15,2002. Nasdaq requests that 
the Commission waive both the 5-day notice and 30-day pre-operative 
requirements contained in Rule 19b-4(f)(6)(iii) \5\ of the Act. If such 
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. Nasdaq now proposes to extend, through April 
15,2002, that pilot program. Extension until April 15th, will allow the 
termination date of the short sale pilot to coincide with the 
termination date of Nasdaq's decimal-related Manning customer limit 
order protection pilot and the termination date set by the Commission 
for all decimal-related pilot programs.\7\ If

[[Page 10949]]

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 that 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\ Nasdaq recently filed with the Commission to obtain 
permanent approval of the penny short sale rule. (See SR-NASD 2002-
09). Please note that Nasdaq incorrectly stated in that filing that 
it had filed to extend the short sale pilot until April 15,2002.
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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 \8\ 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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    \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 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 \9\ and 
Rule 19b-4(f)(6) thereunder.\10\ 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    Nasdaq has requested the Commission waive both the 5-day notice and 
30-day pre-operative requirements contained in Rule 19b-4(f)(6) \11\ 
and has requested that the Commission accelerate the operative date. 
The Commission finds good cause to waive both the 5-day notice and 30-
day pre-operative requirements because the extension of the pilot is 
consistent with the protection of investors and the public interest. 
Acceleration of the operative date will allow the pilot to continue 
uninterrupted through April 15,2002, the deadline for which self-
regulatory organizations must file proposed rule changes to set the 
minimum price variation for quoting in a decimals environment. For 
these reasons, the Commission finds good cause to waive both the 5-day 
notice and 30-day pre-operative requirements.\12\
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    \11\ Id.
    \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-2002-30 and should be 
submitted by April 1, 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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-5780 Filed 3-8-02; 8:45 am]
BILLING CODE 8010-01-U