[Federal Register Volume 68, Number 238 (Thursday, December 11, 2003)]
[Notices]
[Pages 69102-69103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-30703]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48877; File No. SR-NASD-2003-179]


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

 December 4, 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 December 1, 2003, 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 and II 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 June 30, 2004, the penny ($0.01) 
legal short sale standard contained in NASD Interpretative Material 
3350 (``IM-3350'').\5\ Without such an extension this standard would 
terminate on December 1, 2003. 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 June 30, 2004. Nasdaq requests that 
the Commission waive both the 5-day notice and 30-day operative 
requirements contained in Rule 19b-4(f)(6)(iii) \6\ of the Act. If such 
waivers are granted by the Commission, Nasdaq will implement this rule 
change immediately.
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    \5\ In its filing, Nasdaq inadvertently referred to text changes 
in subparagraph (b)(1) of IM-3350 instead of subparagraph (b)(2). 
Changes to NASD Rule 3350 and IM-3350 renumbered subparagraph (b)(1) 
as subparagraph (b)(2). See Securities Exchange Act Release No. 
46999 (December 13, 2002), 67 FR 78534 (December 24, 2002). 
Telephone call between Gregory J. Dumark, Division of Market 
Regulation, Commission, and Thomas P. Moran, Office of General 
Counsel, Nasdaq.
    \6\ 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,\7\ 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 December 1, 2003.\8\ 
Nasdaq now proposes to extend, through June 30, 2004, that pilot 
program. Extension until June 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.\9\ 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

[[Page 69103]]

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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    \7\ Securities Exchange Act Release No. 44030 (March 2, 2001), 
66 FR 14235 (March 9, 2001).
    \8\ Securities Exchange Act Release No. 47309 (February 4, 
2003), 68 FR 6981 (February 11, 2003).
    \9\ 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 \10\ 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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    \10\ 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 \11\ 
and Rule 19b-4(f)(6) thereunder.\12\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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 
June 30, 2004, 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.\13\
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    \13\ 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. Comments 
may also be submitted electronically at the following e-mail address: 
[email protected]. All comment letters should refer to SR-NASD-
2003-179. This file number should be included on the subject line if e-
mail is used. To help us process and review comments more efficiently, 
comments should be sent in hardcopy or by e-mail but not by both 
methods. 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-2003-179 and should be submitted by January 2, 2004.

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-30703 Filed 12-10-03; 8:45 am]
BILLING CODE 8010-01-P