[Federal Register Volume 69, Number 144 (Wednesday, July 28, 2004)]
[Notices]
[Pages 45103-45104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17176]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50059; File No. SR-NASD-2004-021]


Self-Regulatory Organizations; Order Granting Approval to 
Proposed Rule Change and Amendment No. 1 Thereto by the National 
Association of Securities Dealers, Inc. Relating to Reporting of 
Cancelled Trades

July 22, 2004.
    On February 4, 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''), pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to require members to report the 
cancellation of any trades previously submitted to the Nasdaq Market 
Center. On May 19, 2004, Nasdaq filed an amendment to the proposed rule 
change.\3\ The proposed rule change, as amended, was published for 
comment in the Federal Register on June 17,

[[Page 45104]]

2004.\4\ The Commission received no comments on the proposal. This 
order approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Mary M. Dunbar, Vice President and Deputy 
General Counsel, Nasdaq, to Katherine A. England, Assistant 
Director, Commission, dated May 18, 2004 (``Amendment No. 1''). 
Amendment No. 1 replaced Nasdaq's February 4, 2004 filing in its 
entirety.
    \4\ See Securities Exchange Act Release No. 49844 (June 10, 
2004), 69 FR 33980.
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    The Commission finds that the proposed rule change is consistent 
with the provisions of section 15A of the Act,\5\ applicable to a 
national securities association.\6\ In particular, the Commission 
believes that the proposal is consistent with section 15A(b)(6) of the 
Act \7\ which requires, among other things, that the rules of a 
securities association be designed to prevent fraudulent and 
manipulative acts and practices, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, and, in general, to protect investors and the public 
interest.
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    \5\ 15 U.S.C. 78o-3.
    \6\ In approving this proposed rule change, the Commission has 
considered its impact on efficiency, competition and capital 
formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78o-3(b)(6).
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    The Commission believes that the proposed rule change should 
improve the quality and accuracy of information disseminated by Nasdaq 
about transactions in its market. Under the proposal, members must 
notify Nasdaq, through a submission, when they cancel a trade 
previously reported to the Nasdaq Market Center.\8\ The member that 
originally had the obligation to report the trade also will bear the 
responsibility to report the cancellation of the trade.\9\ The 
Commission believes that, by assuring Nasdaq has timely notice of 
cancelled trades, this reporting requirement should improve the 
accuracy of the information disseminated by Nasdaq to market 
participants and should help to ensure that Nasdaq maintains an 
accurate audit trail.
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    \8\ Under the proposal, members will not be required to submit a 
cancellation report if Nasdaq cancels a trade using its authority 
under NASD Rule 11890. In such situations, Nasdaq would submit the 
cancellation report.
    \9\ For cancelled trades executed through the Nasdaq Market 
Center execution service, which automatically submits trade reports, 
the member that would have been responsible for submitting the 
original report (but for the system reporting the trade) will be 
responsible for initiating the cancellation. For example, when a 
trade executed between two market makers in the Nasdaq Market Center 
execution service is subsequently cancelled, the sell side member is 
responsible for initiating the cancellation.
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\10\ that the proposed rule change, as amended, (SR-NASD-2004-021) 
be, and hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-17176 Filed 7-27-04; 8:45 am]
BILLING CODE 8010-01-P