[Federal Register Volume 70, Number 12 (Wednesday, January 19, 2005)]
[Notices]
[Pages 3081-3083]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-173]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51025; File No. SR-NASD-2005-01]


Self-Regulatory Organizations; Notice of a Proposed Rule Change 
by National Association of Securities Dealers, Inc. Relating to Changes 
to Rule 3360 in Light of the SEC Regulation SHO

January 11, 2005.
    Pursuant to Section 19(b)(3) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 7, 2005, 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. 
NASD has designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act,\3\ which renders the proposal effective upon receipt of this 
filing by 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)(3).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4.

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[[Page 3082]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend NASD Rule 3360 to change references from 
``SEC Rule 3b-3'' to ``SEC Rule 200,'' thereby conforming the rule 
language in Rule 3360 in light of the SEC's new short sale regulation, 
Regulation SHO. Below is the text of the proposed rule change. Proposed 
new language is in italics; proposed deletions are in brackets.
* * * * *

3360. Short-Interest Reporting

    (a) No change.
    (b) For purposes of this Rule, ``short'' positions to be reported 
are those resulting from ``short sales'' as that term is defined in SEC 
Rule 200[3b-3,] of Regulation SHO, with the exception of positions that 
meet the requirements of Subsections (e)(1), (6), (7), (8), [(9),] and 
(10) of SEC Rule 10a-1 adopted under the Act.
* * * * *

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
    On June 23, 2004, the SEC adopted certain provisions of a new short 
sale regulation, designated Regulation SHO (Reg SHO).\4\ Reg SHO 
includes, among other provisions, a new SEC Rule 200, which among other 
things, incorporates SEC Rule 3b-3 under the Act with some 
modifications to define ownership and aggregation of securities 
positions, and includes a requirement to mark all sell orders in all 
equity securities. SEC Rule 3b-3 was repealed and reserved. The 
compliance date for SEC Rule 200 of Reg SHO was January 3, 2005.
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    \4\ See Exchange Act Release No. 50103 (July 28, 2004), 69 FR 
48008 (August 6, 2004).
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    Given that SEC Rule 3b-3 is now incorporated in the new SEC Rule 
200 established by Reg SHO, NASD is proposing to amend Rule 3360 to 
replace the reference to ``SEC Rule 3b-3'' with ``SEC Rule 200,'' 
thereby conforming the rule language in Rule 3360 in light of Reg SHO. 
NASD has filed the proposed rule change for immediate effectiveness. 
The effective date and the implementation date will be the date of 
filing, January 7, 2005.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\5\ which requires, among 
other things, that NASD rules must be 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. NASD believes that conforming references in Rule 3360 
to new SEC Rule 200 in recently adopted Reg SHO will more easily 
identify the appropriate definitions of ``short sales.''
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    \5\ 15 U.S.C. 78o-3(b)(6)(A).
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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

    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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder. NASD requests that the Commission waive both the 5-
day notice and 30-day pre-operative requirements contained in Rule 19b-
4(f)(6)(iii).\6\ NASD believes good cause exists to grant such waivers 
because of the importance of short sale regulation to the protection of 
investors and the fact that the pilot programs will each expire if not 
extended. NASD will implement this rule change immediately.
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    \6\ Under subparagraph (f)6)(iii) of Rule 19b-4, the proposal 
may not become operative for 30 days after the date of its filing, 
or such shorter time as the Commission may designate if consistent 
with the protection of investors and the public interest, and the 
self-regulatory organization must file notice of its intent to file 
the proposed rule change at least five business days beforehand. 17 
CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 5-day notice and 30-day 
pre-operative delay is consistent with the protection of investors and 
the public interest. The Commission believes that accelerating the 
operative date does not raise any new regulatory issues, significantly 
affect the protection of investors or the public interest, or impose 
any significant burden on competition. For these reasons, the 
Commission designates the proposed rule change as effective and 
operative immediately.
    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 an e-mail to [email protected]. Please include 
File Number SR-NASD-2005-001 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-2005-001. 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

[[Page 3083]]

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, 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 the File Number SR-NASD-2005-001 and should be 
submitted on or before February 9, 2005.

    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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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E5-173 Filed 1-18-05; 8:45 am]
BILLING CODE 8010-01-P