68 FR 11 pgs. 2382-2383 - Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by National Association of Securities Dealers, Inc. Relating to Short Interest Reporting
Type: NOTICEVolume: 68Number: 11Pages: 2382 - 2383
Docket number: [Release No. 34-47158; File No. SR-NASD-2002-178]
FR document: [FR Doc. 03-950 Filed 1-15-03; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47158; File No. SR-NASD-2002-178]
Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by National Association of Securities Dealers, Inc. Relating to Short Interest Reporting
January 10, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934, as amended, ("Act")1and Rule 19b-4 thereunder,2notice is hereby given that on December 16, 2002, 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 stated policy, practice, or interpretation with respect to the meaning, administration or enforcement of an existing rule" under paragraph (f)(1) of Rule 19b-4 under the Act,3which 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.
Footnotes:
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b-4.
3 17 CFR 240.19b-4(f)(1).
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 clarify member firms' reporting requirements of short positions held on behalf of other broker/dealers. Below is the text of the proposed rule change. The proposed new language is in italics; the proposed deletions are in brackets.
3360. Short-Interest Reporting
(a) Each member shall maintain a record of total "short" positions in all customer and proprietary firm accounts in securities included in The Nasdaq Stock Market and in each other security listed on a registered national securities exchange and not otherwise reported to another self-regulatory organization and shall regularly report such information to [the Association] NASD in such a manner as may be prescribed by [the Association] NASD. For the purposes of this rule, the term "customer" includes a broker/dealer. Reports shall be made as of the close of the settlement date designated by [the Association] NASD . Reports shall be received by [the Association] NASD no later than the second business day after the reporting settlement date designated by [the Association] NASD.
(b) No change.
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
The purpose of the proposed rule change is to clarify members' short interest reporting requirements for short positions held on behalf of other broker/dealers. NASD Rule 3360(a) requires members to maintain a record of total short positions in all customer and proprietary firm accounts in Nasdaq securities (and listed securities if not reported to another self-regulatory organization ("SRO")) and requires members to report such information to NASD on a monthly basis. Rule 3360(b) provides that short positions required to be reported under the Rule are those resulting from short sales as the term is defined in Rule 3b-3 under the Act,4with limited exceptions.
Footnotes:
4 Rule 3b-3 under the Exchange Act provides, in part, the following: "The term 'short sale' means any sale of a security which the seller does not own or any sale which is consummated by the delivery of a security borrowed by, or for the account of, the seller."
NASD staff has received inquiries from members concerning the application of Rule 3360 in light of the definition of "customer" in NASD Rule 0120(g). Specifically, Rule 0120(g) provides that the term "customer" does not include a broker or dealer, unless the context otherwise provides. As a result, members have inquired whether short sale positions in accounts held for other broker/dealers are required to be reported under Rule 3360.
In response to such inquiries, the staff has advised members that short sale positions held for other broker/dealers that fall within the definition of short position provided in Rule 3360(b) must be reported under Rule 3360(a), unless these positions already are reported to an SRO. This long-standing position is consistent with that taken by other SROs with respect to their short interest reporting requirements.5Non-self-clearing broker/dealers generally are considered to have satisfied their reporting requirement by making appropriate arrangements with their respective clearing organizations. In addition, because non-member broker/dealers are not subject to NASD rules and, therefore, are not required to comply with Rule 3360, it is particularly important that members understand that they must report such positions under the Rule, unless these positions are otherwise reported to an SRO. Accordingly, to eliminate all ambiguity, NASD proposes to amend Rule 3360(a) to clarify that short sale positions in accounts held for other broker/dealers must be reported, unless the position is otherwise reported to an SRO.
Footnotes:
5 See Securities Exchange Act Release No. 35287 (January 27, 1995), 60 FR 6743 (February 3, 1995), approving amendments to short interest reporting rules of NASD, New York Stock Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange, Boston Stock Exchange, Chicago Stock Exchange, and Chicago Board Options Exchange, to ensure uniform short position reporting across each of the SROs.
2. Statutory Basis
NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act6, which requires, among other things, that the NASD's rules 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 the proposed rule change is necessary to ensure that members' short interest reporting is accurate and complete.
Footnotes:
6 15 U.S.C. 78o-3(b)(6).
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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others
NASD has neither solicited nor received written comments on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
NASD has designated the proposed rule change as "constituting a stated policy, practice, or interpretation with respect to the meaning, administration or enforcement of an existing rule" under Section 19(b)(3)(A) of the Act7and Rule 19b-4(f)(1) thereunder,8which renders the proposal effective upon receipt of this filing by the Commission.
Footnotes:
7 15 U.S.C. 78s(b)(3)(A).
8 17 CFR § 240.19b-4(f)(1).
At any time within 60 days of this filing, the Commission may summarily abrogate this proposal 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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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. Copies of such filing will also be available for inspection and copying at the principal office of NASD. All submissions should refer to file number SR-NASD-2002-178 and should be submitted by February 6, 2003.
For the Commission, by the Division of Market Regulation, pursuant to the delegated authority.9
Footnotes:
9 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-950 Filed 1-15-03; 8:45 am]
BILLING CODE 8010-01-P