[Federal Register Volume 68, Number 50 (Friday, March 14, 2003)]
[Notices]
[Pages 12397-12398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6128]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47470; File No. SR-NASD-2003-31]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Extend a Pilot With Respect to Amendments 
to NASD Rule 2520, Margin Requirements for Security Futures Contracts

March 7, 2003.
    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 5, 2003, the National Association of Securities Dealers, Inc. 
(``NASD''), filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in items I and 
II below, which items have been prepared by NASD. NASD has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under section 19(b)(3)(A)(iii) of the Exchange Act,\3\ and 
paragraph (f)(6) of rule 19b-4 under the Act,\4\ which renders the 
proposal effective upon receipt of this filing by the Commission.\5\ 
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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The NASD has requested that the Commission waive both the 
five-day pre-filing notification requirement and the 30-day 
operative delay, as specified in rule 19b-4(f)(6)(iii). 17 CFR 
240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change extends until March 20, 2003, the 
effectiveness of the pilot program (``Pilot'') amending NASD rule 2520 
(``Margin Requirements'') to establish margin requirements for security 
futures contracts. On January 24, 2003, the Commission approved the 
amendments to NASD rule 2520 on a pilot basis ending March 6, 2003.\6\
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    \6\ See Securities and Exchange Act Release No. 47244, 68 FR 
5317 (February 3, 2003). Specifically, the Pilot allows NASD to 
facilitate the trading in security futures in securities accounts 
for those NASD members that are not also members of the NYSE while, 
at the same time, considering any comments it receives on the 
amendments to rule 2520 relating to margin requirements for security 
futures contracts.
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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 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 November 15, 2002, NASD filed with the Commission a proposed 
rule change to amend NASD rule 2520 to establish margin rules for 
security futures contracts.\7\ On January 15, 2003, NASD filed 
Amendment No. 2 to the proposed rule change requesting that the 
Commission approve the proposed rule change on a pilot basis under the 
same terms as the Commission approval on a pilot basis of the 
amendments to New York Stock Exchange, Inc. (``NYSE'') rule 431.\8\ The 
SEC approved the proposed rule change, as amended, on a pilot basis 
until March 6, 2003.\9\
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    \7\ See Securities and Exchange Act Release No. 46995 (December 
13, 2002), 67 FR 78543 (December 24, 2002) (Notice of Filing of a 
Proposed Rule Change and Amendment No. 1 to NASD Rule 2520 Relating 
to Margin Rule Amendments for Security Futures Contracts (SR-NASD-
2002-166)). See also letter from Gary L. Goldsholle, Associate 
General Counsel, NASD, to Katherine A. England, Assistant Director, 
Division of Market Regulation, (``Division''), Commission, dated 
November 22, 2002 (``Amendment No. 1''). Amendment No. 1 made non-
substantive technical changes to the proposed rule text.
    \8\ See letter from Gary L. Goldsholle, Associate General 
Counsel, NASD, to Katherine A. England, Assistant Director, 
Division, Commission, dated January 15, 2003 (``Amendment No. 2''). 
See also Securities and Exchange Act Release Nos. 46782 (November 7, 
2002), 67 FR 69052 (November 14, 2002) (SR-NYSE-2002-53) and 47129 
(January 3, 2003), 68 FR 2094 (January 15, 2003) (SR-NYSE-2003-01).
    \9\ See supra note 6.
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    NASD proposes to extend this Pilot from March 6, 2003 until March 
20, 2003, to allow NASD additional time to review comments it has 
received regarding the amendments \10\ and also to ensure consistency 
with the amendments to NYSE rule 431 relating

[[Page 12398]]

to margin requirements for security futures contracts.\11\
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    \10\ The Commission received one comment letter on NASD's 
proposed rule change. See letter from Edward J. Joyce, President and 
Chief Operating Officer, Chicago Board Options Exchange, Inc. 
(``CBOE''), to Jonathan G. Katz, Secretary, Commission, dated 
December 20, 2002.
    \11\ See supra note 8.
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2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(6) of the Act,\12\ in that NASD's rules 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest by establishing margin rules 
for security futures that are comparable with those developed by the 
NYSE.
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    \12\ 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

    NASD has received one written comment on the original proposed rule 
change that was filed with the Commission on November 15, 2002, and 
amended on January 15, 2003.\13\ NASD is currently considering the 
comments.
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    \13\ See supra note 10.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days (or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest) after the date of the filing, the proposed rule change has 
become effective pursuant to section 19(b)(3)(A) of the Act \14\ and 
rule 19b-4(f)(6) thereunder.\15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under rule 19b-4(f)(6) normally must 
not become operative prior to 30 days after the date of the filing. In 
addition, a self-regulatory organization filing a proposed rule change 
under rule 19b-4(f)(6)(iii) normally must give the Commission written 
notice of its intent to file the proposed rule change five days prior 
to the date of filing. However, rule 19b-4(f)(6)(iii) permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. NASD has 
requested that the Commission waive both the five-day pre-filing 
requirement and designate that the proposed rule change become 
operative immediately to allow the Pilot to continue in effect on an 
uninterrupted basis and for NASD to consider comments it has received 
on the Pilot.
    The Commission believes it is consistent with the protection of 
investors and the public interest to waive the five-day pre-filing 
requirement and designate the proposal immediately operative.\16\ 
Accelerating the operative date and waiving the pre-filing requirement 
should permit NASD to permit customers to continue to trade securities 
futures contracts in securities accounts on an uninterrupted basis 
while NASD considers the comments it has received on the Pilot. The 
Commission notes that NASD anticipates filing a new proposed rule 
change to adopt the Pilot on a permanent basis. Accordingly, the 
Commission designates the proposed rule change to be effective and 
operative upon filing with the Commission.
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    \16\ 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 proposed rule 
change 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 NASD.
    All submissions should refer to SR-NASD-2003-31 and should be 
submitted by April 4, 2003.

    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-6128 Filed 3-13-03; 8:45 am]
BILLING CODE 8010-01-P