[Federal Register Volume 67, Number 78 (Tuesday, April 23, 2002)]
[Notices]
[Pages 19788-19790]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-9856]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45761; File No. SR-NASD-2002-53]


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

April 16, 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 April 10, 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

[[Page 19789]]

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 September 30, 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 April 15, 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 September 30, 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. The pilot program has been continuously extended 
since that date and is currently set to expire on April 14, 2002.\7\ 
Nasdaq now proposes to extend, through September 30, 2002, that pilot 
program. Extension until September 30th, 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. 45504 (March 5, 2002), 
67 FR 10948 (March 11, 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 the Commission waive both the 5-day notice and 
30-day pre-operative requirements contained in Rule 19b-4(f)(6)\12\ 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 September 30, 2002, 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 finds good cause to 
waive both the 5-day notice and 30-day pre-operative requirements.\13\
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    \12\ Id.
    \13\ For purposes 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

[[Page 19790]]

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-2002-53 and should be 
submitted by May 14, 2002.

    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-9856 Filed 4-22-02; 8:45 am]
BILLING CODE 8010-01-P