[Federal Register Volume 68, Number 221 (Monday, November 17, 2003)]
[Notices]
[Pages 64940-64941]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28599]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48761; File No. SR-NASD-2003-147]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. To Amend 
the NASD Delegation Plan To Remove the Nasdaq Stock Market, Inc.'s 
Representation of NASD in the UTP Plan

November 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 October 3, 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, II, and III below, which items have been prepared by NASD. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend NASD's Plan of Allocation and Delegation 
of Functions by NASD to Subsidiaries (``Delegation Plan'') to remove 
The Nasdaq Stock Market, Inc.'s (``Nasdaq'') representation of NASD in 
the Joint Self-Regulatory Organization Plan Governing the Collection, 
Consolidation and Dissemination of Quotation and Transaction 
Information for Nasdaq-Listed Securities Traded on Exchanges on an 
Unlisted Trading Privilege Basis (``UTP Plan'').
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.
    A. Delegation of Functions and Authority.
    1. Subject to section I.B.11., [the] NASD hereby delegates to 
Nasdaq and Nasdaq assumes the following responsibilities and functions 
as a registered securities association:
    a. through g. No Change.
    h. To administer [the Association's] NASD's involvement in National 
Market System Plans related to [Nasdaq/Unlisted Trading Privileges or] 
trading in the third market for securities listed on a registered 
exchange. The scope of this administrative authority extends

[[Page 64941]]

solely to the exercise of NASD's voting authority.
    i. through o. No Change.
    2. No Change.
    B. through C. No Change.
* * * * *

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
    In 1996, NASD delegated authority to Nasdaq to administer NASD's 
involvement in the National Market System Plans relating to Nasdaq/
Unlisted Trading Privileges or trading in the third market for 
securities listed on a registered exchange.\3\ This delegation was 
appropriate at the time because Nasdaq was the only facility for 
quoting and trade reporting in Nasdaq securities operated by NASD. 
Today, NASD also operates the Alternative Display Facility (``ADF''). 
The SEC, as a condition to the approval of Nasdaq's SuperMontage rule 
filing, required NASD to operate the ADF to ensure the existence of an 
alternative venue for NASD members to quote and trade report in Nasdaq 
securities. While the ADF is operating as a separate NASD facility for 
Nasdaq securities, NASD has delegated its participation rights, 
including the right to vote in the UTP Plan, to Nasdaq. Accordingly, 
the ADF is not separately represented in the UTP Plan and has no voting 
authority.
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    \3\ Securities Exchange Act Release No. 37107 (April 11, 1996), 
61 FR 16948 (April 18, 1996) (SR-NASD-96-16).
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    On April 22, 2003, the Director of the SEC's Division Market 
Regulation ``Director'' wrote to NASD's Chairman and Chief Executive 
Officer and requested that NASD exercise its own participation rights 
in the UTP Plan.\4\ The SEC staff also requested that the UTP Plan be 
amended to recognize Nasdaq as a separate UTP Plan participant, thereby 
ensuring separate independent participation by both NASD and Nasdaq in 
the UTP Plan.\5\
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    \4\ Letter to Robert R. Glauber, Chairman and CEO, NASD, from 
Annette L. Nazareth, Director, Divison of Market Regulation, SEC, 
dated April 22, 2003.
    \5\ Two amendments to the UTP Plan were proposed, that would 
allow Nasdaq to be recognized as a separate UTP Plan participant. 
The UTP Operating Committee voted on both proposed amendments on 
September 16, 2003. Neither amendment received the affirmative and 
unanimous vote necessary to constitute action by the Operating 
Committee to seek an amendment to the UTP Plan. Nasdaq also is 
required to pursue an exemption from SEC Rule 11Aa3-2 (17 CFR 
240.11Aa3-2). The Director indicated in her letter to NASD that SEC 
staff is ``prepared to approve the necessary UTP Plan amendments (or 
to initiate them on our own if the Nasdaq UTP Committee does not 
approve them) and to issue the necessary exemption.''
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    This proposed rule change effectuates the Director's request by 
proposing to amend the Delegation Plan to retract the delegation of its 
UTP participation rights to Nasdaq. In addition, the proposed rule 
change replaces several references to ``the Association'' and ``the 
NASD'' in the text of the proposed rule change with ``NASD.'' NASD no 
longer refers to itself using its full corporate name, ``the 
Association'' or ``the NASD.'' Instead, NASD uses ``NASD'' unless 
otherwise appropriate for corporate or regulatory reasons.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(6) of the Act,\6\ which requires, among 
other things, that NASD's rules be designed to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system. NASD is taking action to ensure it exercises its own 
participation rights in the Nasdaq UTP Plan.
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    \6\ 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, as amended.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which NASD consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 the 
NASD. All submissions should refer to file number SR-NASD-2003-147 and 
should be submitted by December 8, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-28599 Filed 11-14-03; 8:45 am]
BILLING CODE 8010-01-P