[Federal Register Volume 69, Number 160 (Thursday, August 19, 2004)]
[Notices]
[Pages 51500-51502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18981]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50192; File No. SR-NASD-2004-123]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Delete IM-2210-4(b) and Rule Series 3400 as 
Obsolete

August 13, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on August 10, 2004, the National Association of Securities 
Dealers, Inc. (``NASD'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items

[[Page 51501]]

have been prepared by NASD. NASD has designated the proposed rule 
change as ``non-controversial'' pursuant to Section 19(b)(3)(A)(iii) of 
the Act \3\ and Rule 19b-4(f)(6) \4\ thereunder. 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to delete as obsolete NASD IM-2210-4(b) 
(Certification of Membership) and NASD Rule Series 3400 (Computer 
Systems), which contains NASD Rule 3420 (Mandatory Decimal Pricing 
Testing). Below is the text of the proposed rule change. Proposed 
deletions are in brackets.
* * * * *

IM-2210-4. Limitations on Use of NASD's Name

    [(a) Statements of Membership]
    Members may indicate NASD membership in conformity with Article XV, 
Section 2 of the NASD By-Laws in one or more of the following ways:
    (1) in any communication with the public, provided that the 
communication complies with the applicable standards of Rule 2210 and 
neither states nor implies that NASD or any other regulatory 
organization endorses, indemnifies, or guarantees the member's business 
practices, selling methods, the class or type of securities offered, or 
any specific security;
    (2) in a confirmation statement for an over-the-counter transaction 
that states: ``This transaction has been executed in conformity with 
the NASD Uniform Practice Code.''
    [(b) Certification of Membership
    Upon request to NASD, a member will be entitled to receive an 
appropriate certification of membership, which may be displayed in the 
principal office or a registered branch office of the member. The 
certification shall remain the property of NASD and must be returned by 
the member upon request of the NASD Board or its Chief Executive 
Officer.]
* * * * *

[3400. COMPUTER SYSTEMS]

[3420. Mandatory Decimal Pricing Testing]

    [(a) Clearing firms and market makers of the Association must 
conduct or participate in the testing of their computer systems to 
ascertain decimal pricing conversion compatibility of such systems in 
such manner and frequency as the Association may prescribe.]
    [(b) Every clearing firm and market maker required by the 
Association to conduct or participate in testing of computer systems 
shall provide to the Association such reports relating to the testing 
as the Association may prescribe.]
    [(c) Clearing firms and market makers shall maintain adequate 
documentation of tests required pursuant to this Rule and the results 
of such testing for examination by the Association.]
* * * * *

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 statutory 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
    NASD is proposing to delete IM-2210-4(b) and Rule 3420 because NASD 
has determined that the provisions of IM-2210-4(b) and Rule 3420 are no 
longer applicable and, therefore, should be deleted as obsolete.
a. NASD IM-2210-4(b)
    IM-2210-4(b) provides that, upon request to NASD, a member may 
receive an appropriate certification of membership. NASD represents 
that it no longer issues such certifications. NASD, therefore, proposes 
deleting IM-2210-4(b) as obsolete and amending IM-2210-4 to reflect 
subparagraph (a) as its only text.
b. NASD Rule 3420
    On June 27, 2000, NASD adopted Rule 3420 (Mandatory Decimal Pricing 
Testing).\5\ Rule 3420, among other things, requires NASD clearing 
firms and market makers to conduct or participate in the securities 
industry's decimalization pricing tests of computer systems. NASD 
required such testing in compliance with the Commission's order for 
certain securities industry participants to develop plans for 
conversion to decimal pricing.\6\ NASD intended the testing to 
ascertain the decimal pricing conversion compatibility of its members' 
computer systems, and wanted to ensure that conversion to decimal 
pricing would occur successfully with minimal disruption of the markets 
and minimal impact on investors. Since the conversion to decimal 
pricing has occurred, NASD represents that it no longer requires its 
members to test their computer systems for any such decimal pricing 
conversion; therefore, NASD is proposing to the delete Rule 3420 as 
obsolete.
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    \5\ See Securities Exchange Act Release No. 43003 (June 30, 
2000), 65 FR 43067 (July 12, 2000) (SR-NASD-2000-40).
    \6\ See Securities Exchange Act Release No. 42360 (January 28, 
2000), 65 FR 5003 (February 2, 2000).
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    In connection with the deletion of Rule 3420, NASD is also 
proposing to delete the heading in the NASD Manual to the Rule 3400 
Series (Computer Systems). NASD represents that, upon the deletion of 
Rule 3420, the heading for the Rule 3400 Series will no longer be 
necessary since Rule 3420 is the only rule in the series.
    NASD represents that it will announce the rule change in a Notice 
to Members to be published no later than 30 days following the 
publication of this notice in the Federal Register.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A of the Act,\7\ in general, and with Section 
15A(b)(6) of the Act,\8\ in particular, in that the proposed rule 
change is 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.
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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 of Burden on Competition

    NASD does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement of Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

[[Page 51502]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    NASD has designated the proposed rule change as ``non-
controversial'' and a rule change that: (1) Does not significantly 
affect the protection of investors or the public interest; (2) does not 
impose any significant burden on competition; and (3) by its terms, 
does not become operative for 30 days after the date of this filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest. Therefore, the 
foregoing rule change has become effective upon filing pursuant to 
Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) \10\ 
thereunder.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    Under Rule 19b-4(f)(6)(iii), a proposed ``non-controversial'' rule 
change does not become operative for 30 days after the date of filing, 
unless the Commission designates a shorter time. NASD has requested 
that the Commission waive the 30-day operative delay so that the 
proposed rule change will become immediately effective upon filing, 
since the provisions of IM-2210-4(b) and Rule 3420 are obsolete and no 
longer applicable. The Commission hereby waives the 30-day operative 
delay and believes such waiver is consistent with the protection of 
investors and the public interest.\11\ The Commission notes that the 
relevant provisions of IM-2210-4(b) and Rule 3420 are obsolete and no 
longer applicable. Accelerating the operative date will allow the NASD 
to immediately reflect the currently applicable rules in the NASD 
Manual.
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    \11\ 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. See 15 
U.S.C. 78c(f).
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    In addition, Rule 19b-4(f)(6) requires the self-regulatory 
organization to give the Commission written notice of its intent to 
file the proposed rule change, along with a brief description and text 
of the proposed rule change, at least five business days prior to the 
date of filing of the proposed rule change, or such shorter time as 
designated by the Commission. NASD complied with this requirement.
    At any time within 60 days of the filing of such 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.\12\
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    \12\ See 15 U.S.C. 78s(b)(3)(C).
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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. 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 an e-mail to [email protected]. Please include 
File Number SR-NASD-2004-123 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-2004-123. 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of 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-2004-123 
and should be submitted on or before September 9, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-18981 Filed 8-18-04; 8:45 am]
BILLING CODE 8010-01-P