[Federal Register Volume 70, Number 50 (Wednesday, March 16, 2005)]
[Notices]
[Page 12924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1157]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51356; File No. SR-NASD-2004-159]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving Proposed Rule Change and Amendment No. 1 
Thereto To Allow NASD, on a Pilot Basis, To Review Denial of Access 
Complaints Related to the Alternative Display Facility

March 10, 2005.
    On October 22, 2004, the National Association of Securities 
Dealers, Inc. (``NASD'') 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 allow NASD, on a pilot basis, 
to review denial of access complaints related to the Alternative 
Display Facility (``ADF''). On January 11, 2005, NASD filed Amendment 
No. 1 to the proposed rule change.\3\ The proposed rule change, as 
amended, was published in the Federal Register on February 4, 2005.\4\ 
The Commission received no comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the NASD clarified the scope of 
authority it and the Market Regulation Committee would have to 
review denials of access.
    \4\ See Securities Exchange Act Release No. 51092 (January 28, 
2005), 70 FR 6061.
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    The proposed rule change would establish on a pilot basis new NASD 
Rule 4400A, which would give NASD the authority to receive and review 
complaints against an NASD Market Participant alleging denial of direct 
or indirect access of the NASD Market Participant's quotations in the 
ADF that the NASD Market Participant is required to provide pursuant to 
NASD Rule 4300A. In addition, proposed NASD Rule 4400A would set forth 
procedures for reviewing such complaints and would delegate authority 
to NASD's Market Regulation Committee to review denial of access 
determinations rendered in accordance with Rule 4400A.
    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
association.\5\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 15A(b)(6) of the Act,\6\ which 
requires, among other things, that the rules of an association 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.
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    \5\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78o-3(b)(6).
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    New NASD 4400A affords some due process to a party claiming that an 
NASD Market Participant quoting ADF has denied it access to the NASD 
Market Participant's system. Establishing such a process should help 
deter improper denials of access. The Commission believes that it is 
reasonable and consistent with the Act for NASD to deter such denials 
by requiring an NASD Market Participant to respond to a complaint in 
the manner set forth in the new rule. Furthermore, where such 
deterrence is not effective, NASD will have the authority to direct the 
NASD Market Participant to restore the complainant's access promptly, 
which should help minimize any market disruption caused by an improper 
denial of access.
    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-NASD-2004-159), as amended, 
be hereby approved.
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    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-1157 Filed 3-15-05; 8:45 am]
BILLING CODE 8010-01-P