[Federal Register Volume 70, Number 128 (Wednesday, July 6, 2005)]
[Notices]
[Pages 38992-38994]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3544]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51929; File No. SR-NASD-2005-083]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Definition of ``Non-Professional'' and Use 
of TRACE Transaction Data

June 28, 2005.
    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 June 23, 2005, 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 and 
II below, which Items have been prepared by NASD. NASD filed the 
proposal as a ``non-controversial'' rule change pursuant to Section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which 
renders the proposal effective upon filing with the Commission. The 
Commission is publishing this notice to solicit

[[Page 38993]]

comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    NASD is proposing to amend the definition of ``Non-Professional'' 
in NASD Rule 7010(k)(3)(C)(i), relating to Transaction Reporting and 
Compliance Engine (``TRACE'') transaction data and fees, and add new 
NASD Rule 7010(k)(3)(A)(iv) to clarify that a natural person who 
receives and uses TRACE transaction data for his or her personal, non-
commercial use will not be charged a TRACE market data professional fee 
for such use. The text of the proposed rule change is available on 
NASD's Web site (http://www.nasd.com), at NASD's principal office, and 
at the Commission's Public Reference Room.

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
    NASD seeks to make minor clarifying changes to the definition of 
``Non-Professional'' in NASD Rule 7010(k)(3)(C)(i) and to add new NASD 
Rule 7010(k)(3)(A)(iv). The purpose of the proposed rule change is to 
restructure NASD Rule 7010(k) to reflect more clearly a recently 
approved rule change to permit natural persons actively engaged in 
providing financial services or employed in the financial services 
industry who do not fall within the definition of ``Non-Professional'' 
to access TRACE transaction data solely for personal, non-commercial 
purposes and not be liable for professional TRACE transaction data 
fees.
    Background. NASD recently made minor clarifying amendments to the 
defined term ``Non-Professional'' in NASD Rule 7010(k)(C)(3)(i) to make 
explicit in the rule that persons who are otherwise excluded from the 
definition of ``Non-Professional,'' such as registered persons employed 
by a broker-dealer or an investment adviser, should not be liable for 
professional fees for TRACE market data when such persons access the 
TRACE data solely for their personal, non-commercial use.\5\ The 
amendments became effective June 1, 2005.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 51611 (April 26, 
2005), 70 FR 22735 (May 2, 2005) (order approving File No. SR-NASD-
2005-026); NASD Notice to Members 05-37 (May 2005). For example, a 
registered representative of a broker-dealer is not liable for fees 
charged professionals in those instances where the registered 
representative accesses the TRACE transaction data solely for 
personal, non-commercial use, such as when the registered 
representative accesses TRACE data at home to obtain information 
about bonds held in his or her personal account.
---------------------------------------------------------------------------

    Proposal. The definition of ``Non-Professional'' is used in various 
NASD rules. NASD is concerned that defining the same term differently 
among NASD Rules will create confusion and inefficiencies both for the 
industry and NASD. For the purpose of maintaining uniformity among 
definitions, eliminating confusion among industry professionals who 
must apply the multiple provisions, and creating efficiencies for 
regulatory data searches and data retrieval, NASD is proposing to amend 
the defined term ``Non-Professional'' in NASD Rule 7010(k)(3)(C)(i). 
This amendment would reverse some of the minor clarifying amendments 
previously made but would conform it to other NASD provisions also 
defining ``Non-Professional'' and preserve the previously approved rule 
change providing natural persons who are affiliated with or employed by 
the securities or commodities industry or other parts of the financial 
services industry \6\ access to TRACE transaction data without paying 
professional TRACE data fees when using the data solely for personal, 
non-commercial use.
---------------------------------------------------------------------------

    \6\ Such financial services industry affiliations are described 
fully in NASD Rule 7010(k)(3)(C)(i) in current subparagraphs (a) 
through (d), to be renumbered as subparagraphs (a) through (c).
---------------------------------------------------------------------------

    To effect the restructuring rule change, NASD proposes specific 
minor clarifying changes to NASD Rule 7010(k)(3)(C)(i) that are set 
forth in the proposed rule text. The proposed amendments reverse some 
but not all of the minor clarifying changes recently incorporated in 
the Rule.\7\ NASD also proposes to amend NASD Rule 7010(k)(3)(A) to add 
subparagraph (iv), providing:
---------------------------------------------------------------------------

    \7\ NASD is not revising recently adopted amendments to NASD 
Rule 7010(k)(3)(C)(i)(d) (to be renumbered as NASD Rule 
7010(k)(3)(C)(i)(c)). Prior to amendment, NASD Rule 
7010(k)(3)(C)(i)(d) excluded from ``Non-Professional'' persons 
employed by a bank, insurance company, or other organization exempt 
from registration under federal or state securities laws to perform 
functions that would require registration or qualification if such 
functions were performed for an organization not so exempt if such 
persons used TRACE transaction data for other than personal, 
noncommercial use. The revisions added that ``other employees'' of 
such organizations who use TRACE transaction data for other than 
personal, non-commercial use also are not ``Non-Professionals.''

    A natural person otherwise subject to market data fees under 
Rule 7010(k)(3)(A) is not subject to such fees when he or she 
accesses TRACE transaction data solely for his or her personal, 
---------------------------------------------------------------------------
noncommercial use.

    Together, the proposed amendments continue to make clear that a 
natural person who is registered in one of several capacities as a 
securities or commodities professional, or performs similar functions 
but is not required to be registered due to an exemption, or is an 
employee of certain financial services businesses, may access TRACE 
transaction data free of professional TRACE data charges if the natural 
person uses such data solely for personal, non-commercial uses. These 
changes also would maintain conformity among various NASD provisions in 
which the term ``Non-Professional'' is defined.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\8\ 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, and Section 15A(b)(5) of the Act,\9\ which requires, 
among other things, that NASD rules provide for the equitable 
allocation of reasonable dues, fees, and other charges among members 
and issuers and other persons using any facility or system that NASD 
operates or controls.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78o-3(b)(6).
    \9\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

    NASD believes that continuing to provide access to TRACE data to 
persons who are using TRACE market data solely for personal, non-
commercial use is consistent with the NASD's goals to promote corporate 
bond market transparency, and would not adversely affect the use and 
distribution of TRACE data for the protection of investors and in 
furtherance of the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD does not believe that the proposed rule change would result in 
any burden on competition that is not

[[Page 38994]]

necessary or appropriate in furtherance of the purposes of the Act.

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: (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, and NASD provided the Commission with written notice of its 
intent to file the proposed rule change at least five days prior to the 
filing date, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 
thereunder.\11\ NASD complied with this pre-filing requirement.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. NASD has asked the Commission to 
waive the 30-day operative delay to clarify an existing policy 
regarding TRACE market data fees applicable to professionals and to 
reverse expeditiously recent rule amendments to the definition of 
``Non-Professional'' in Rule 7010(k)(3) regarding the TRACE policy to 
avoid industry confusion. The Commission hereby grants this request and 
designates the proposal to be operative upon filing with the 
Commission.\12\ The Commission believes that maintaining conformity 
among definitions in NASD's rules and reducing fees for non-
professional use of TRACE transaction data are consistent with the 
protection of investors and the public interest.
---------------------------------------------------------------------------

    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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.\13\
---------------------------------------------------------------------------

    \13\ See 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

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 No. SR-NASD-2005-083 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File No. SR-NASD-2005-083. 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, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing will also 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 No. SR-NASD-2005-083 and should be 
submitted on or before July 27, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-3544 Filed 7-5-05; 8:45 am]
BILLING CODE 8010-01-P