[Federal Register Volume 69, Number 94 (Friday, May 14, 2004)]
[Notices]
[Pages 26913-26914]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-10955]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49667; File No. SR-NASD-2004-073]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Change the Minimum Term for Selected 
Equity-Linked Debt Securities

    May 7, 2004.
    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 27, 2004, the National Association of Securities Dealers, Inc. 
(``NASD''), 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 has 
designated the proposed rule change as constituting a ``non-
controversial'' rule change under subparagraph (f)(6) of Rule 19b-4 
under the Act,\3\ which renders the proposal effective upon receipt of 
this filing by the Commission.\4\ 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\ 17 CFR 240.19b-4(f)(6).
    \4\ As required by 17 CFR 240.19b-4(f)(6), Nasdaq has 
represented that the proposed rule change will not significantly 
affect the protection of investors or the public interest, nor will 
it impose any significant burden on competition. Nasdaq also 
fulfilled its obligation to provide at least five business days 
notice to the Commission of its intent to file this proposed rule 
change by notice on April 16, 2004. The NASD's proposed rule change 
is similar to the rules regarding the minimum term of equity-linked 
debt securities for the American Stock Exchange LLC (``Amex''), the 
Chicago Stock Exchange, Inc. (``CHX''), and the New York Stock 
Exchange, Inc. (``NYSE'').
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to modify NASD Rule 4420(g) to reduce the minimum 
term of Selected Equity-linked Debt Securities (``SEEDS'') from two 
years to one year.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in [brackets].\5\
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    \5\ The proposed rule change is marked to show changes to NASD 
Rule 4420(g) as currently reflected in the NASD Manual available at 
www.nasd.com. No other pending or approved rule filings would affect 
the text of Rule 4420(g).
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* * * * *

4420. Quantitative Designation Criteria

    (a) through (f) No change
    (g) Nasdaq will consider designating as Nasdaq National Market 
securities Selected Equity-linked Debt Securities (SEEDS) that 
generally meet the criteria of this paragraph (g). SEEDS are limited-
term, non-convertible debt securities of an issuer where the value of 
the debt is based, at least in part, on the value of another issuer's 
common stock or non-convertible preferred stock (or sponsored American 
Depositary Receipts (ADRs) underlying such equity securities).
    (1) No change
    (2) Equity-Linked Debt Security Listing Standards
    The issue must have:
    (A) through (C) No change
    (D) a term of one [two] to seven years; provided that if the issuer 
of the underlying security is a non-U.S. company, or if the underlying 
security is a sponsored ADR, the issue may not have a term of more than 
three years.
    (3) through (5) No change
    (h) through (l) 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, Nasdaq 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. 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
    The proposed rule change reduces from two years to one the minimum 
term of SEEDS that may qualify for Nasdaq National Market designation

[[Page 26914]]

under NASD Rule 4420(g). Nasdaq represents that several other self-
regulatory organizations that maintain specific listing criteria for 
equity-linked debt securities similar to the criteria in NASD Rule 
4420(g) have in recent years reduced the minimum term requirement with 
respect to such securities from two years to one.\6\ In order to 
provide issuers of equity-linked debt securities that have a term 
shorter than two years with a greater choice of listing venues, Nasdaq 
is now seeking to make the same change. Nasdaq represents that 
comprehensive surveillance procedures, which are designed to identify 
and deter manipulative trading activity, are in place with respect to 
the SEEDS.
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    \6\ See Securities Exchange Act Release No. 42313 (Jan. 4, 
2000), 65 FR 2205 (Jan. 13, 2000) (CHX rule change reducing the 
minimum term of eligible equity-linked debt securities from two 
years to one and eliminating the maximum term requirement); 
Securities Exchange Act Release No. 42110 (Nov. 5, 1999), 64 FR 
61677 (Nov. 12, 1999) (Amex rule change reducing the minimum term of 
eligible equity-linked debt securities from two years to one and 
eliminating the maximum term requirement); Securities Exchange Act 
Release No. 41992 (Oct. 7, 1999), 64 FR 56007 (Oct. 15, 1999) (NYSE 
rule change reducing the minimum term of eligible equity-linked debt 
securities from two years to one and eliminating the maximum term 
requirement).
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\7\ in general and furthers 
the objectives of Section 15A(b)(6) of the Act,\8\ in particular, in 
that, by reducing the minimum term of SEEDS, impediments to a free and 
open market and a national market system will be removed, and investors 
and the public interest will be protected.
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    \7\ 15 U.S.C. 78o-3.
    \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 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

    This proposed rule filing has been filed by Nasdaq as a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A) of the Act 
\9\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\10\ Nasdaq states 
that the foregoing proposed rule change does not significantly affect 
the protection of investors or the public interest, nor does it impose 
any significant burden on competition. Nasdaq also provided the 
Commission with written notice of its intent to file the proposed rule 
change at least five days prior to the filing date, as statutorily 
required.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-(f)(6).
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    Pursuant to subparagraph (f)(6) of Rule 19b-4,\11\ the Commission 
has the authority to shorten the time period for the effectiveness of a 
rule ``if consistent with the protection of investors and the public 
interest.'' In this case, shortening the time period for effectiveness 
from 30 days after the date of filing \12\ to immediate effectiveness 
is consistent with the protection of investors and the public interest 
because approval of this proposed rule conforms the listing criteria 
for equity-linked debt instruments to those of the Amex, the CHX, and 
the NYSE.\13\
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    \11\ Id.
    \12\ Id.
    \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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    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.

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. Comments may be submitted by any of 
the following methods:
    Electronic comments:
     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send E-mail to [email protected]. Please include File 
Number SR-NASD-2004-073 on the subject line.
    Paper comments:
     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NASD-2004-073. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 also will be available for inspection and copying at the 
principal office of the NASD. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NASD-2004-073 and should be submitted on or before June 
4, 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).

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-10955 Filed 5-13-04; 8:45 am]
BILLING CODE 8010-01-P