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U.S. Code as of:
01/19/04
Section 78k-1. National market system for securities; securities information processors
(a) Congressional findings; facilitating establishment of national
market system for securities; designation of qualified securities
(1) The Congress finds that -
(A) The securities markets are an important national asset
which must be preserved and strengthened.
(B) New data processing and communications techniques create
the opportunity for more efficient and effective market
operations.
(C) It is in the public interest and appropriate for the
protection of investors and the maintenance of fair and orderly
markets to assure -
(i) economically efficient execution of securities
transactions;
(ii) fair competition among brokers and dealers, among
exchange markets, and between exchange markets and markets
other than exchange markets;
(iii) the availability to brokers, dealers, and investors of
information with respect to quotations for and transactions in
securities;
(iv) the practicability of brokers executing investors'
orders in the best market; and
(v) an opportunity, consistent with the provisions of clauses
(i) and (iv) of this subparagraph, for investors' orders to be
executed without the participation of a dealer.
(D) The linking of all markets for qualified securities through
communication and data processing facilities will foster
efficiency, enhance competition, increase the information
available to brokers, dealers, and investors, facilitate the
offsetting of investors' orders, and contribute to best execution
of such orders.
(2) The Commission is directed, therefore, having due regard for
the public interest, the protection of investors, and the
maintenance of fair and orderly markets, to use its authority under
this chapter to facilitate the establishment of a national market
system for securities (which may include subsystems for particular
types of securities with unique trading characteristics) in
accordance with the findings and to carry out the objectives set
forth in paragraph (1) of this subsection. The Commission, by rule,
shall designate the securities or classes of securities qualified
for trading in the national market system from among securities
other than exempted securities. (Securities or classes of
securities so designated hereinafter (!1) in this section referred
to as "qualified securities".)
(3) The Commission is authorized in furtherance of the directive
in paragraph (2) of this subsection -
(A) to create one or more advisory committees pursuant to the
Federal Advisory Committee Act (which shall be in addition to the
National Market Advisory Board established pursuant to subsection
(d) of this section) and to employ one or more outside experts;
(B) by rule or order, to authorize or require self-regulatory
organizations to act jointly with respect to matters as to which
they share authority under this chapter in planning, developing,
operating, or regulating a national market system (or a subsystem
thereof) or one or more facilities thereof; and
(C) to conduct studies and make recommendations to the Congress
from time to time as to the possible need for modifications of
the scheme of self-regulation provided for in this chapter so as
to adapt it to a national market system.
(b) Securities information processors; registration; withdrawal of
registration; access to services; censure; suspension or
revocation of registration
(1) Except as otherwise provided in this section, it shall be
unlawful for any securities information processor unless registered
in accordance with this subsection, directly or indirectly, to make
use of the mails or any means or instrumentality of interstate
commerce to perform the functions of a securities information
processor. The Commission, by rule or order, upon its own motion or
upon application, may conditionally or unconditionally exempt any
securities information processor or class of securities information
processors or security or class of securities from any provision of
this section or the rules or regulations thereunder, if the
Commission finds that such exemption is consistent with the public
interest, the protection of investors, and the purposes of this
section, including the maintenance of fair and orderly markets in
securities and the removal of impediments to and perfection of the
mechanism of a national market system: Provided, however, That a
securities information processor not acting as the exclusive
processor of any information with respect to quotations for or
transactions in securities is exempt from the requirement to
register in accordance with this subsection unless the Commission,
by rule or order, finds that the registration of such securities
information processor is necessary or appropriate in the public
interest, for the protection of investors, or for the achievement
of the purposes of this section.
(2) A securities information processor may be registered by
filing with the Commission an application for registration in such
form as the Commission, by rule, may prescribe containing the
address of its principal office, or offices, the names of the
securities and markets for which it is then acting and for which it
proposes to act as a securities information processor, and such
other information and documents as the Commission, by rule, may
prescribe with regard to performance capability, standards and
procedures for the collection, processing, distribution, and
publication of information with respect to quotations for and
transactions in securities, personnel qualifications, financial
condition, and such other matters as the Commission determines to
be germane to the provisions of this chapter and the rules and
regulations thereunder, or necessary or appropriate in furtherance
of the purposes of this section.
(3) The Commission shall, upon the filing of an application for
registration pursuant to paragraph (2) of this subsection, publish
notice of the filing and afford interested persons an opportunity
to submit written data, views, and arguments concerning such
application. Within ninety days of the date of the publication of
such notice (or within such longer period as to which the applicant
consents) the Commission shall -
(A) by order grant such registration, or
(B) institute proceedings to determine whether registration
should be denied. Such proceedings shall include notice of the
grounds for denial under consideration and opportunity for
hearing and shall be concluded within one hundred eighty days of
the date of publication of notice of the filing of the
application for registration. At the conclusion of such
proceedings the Commission, by order, shall grant or deny such
registration. The Commission may extend the time for the
conclusion of such proceedings for up to sixty days if it finds
good cause for such extension and publishes its reasons for so
finding or for such longer periods as to which the applicant
consents.
The Commission shall grant the registration of a securities
information processor if the Commission finds that such securities
information processor is so organized, and has the capacity, to be
able to assure the prompt, accurate, and reliable performance of
its functions as a securities information processor, comply with
the provisions of this chapter and the rules and regulations
thereunder, carry out its functions in a manner consistent with the
purposes of this section, and, insofar as it is acting as an
exclusive processor, operate fairly and efficiently. The Commission
shall deny the registration of a securities information processor
if the Commission does not make any such finding.
(4) A registered securities information processor may, upon such
terms and conditions as the Commission deems necessary or
appropriate in the public interest or for the protection of
investors, withdraw from registration by filing a written notice of
withdrawal with the Commission. If the Commission finds that any
registered securities information processor is no longer in
existence or has ceased to do business in the capacity specified in
its application for registration, the Commission, by order, shall
cancel the registration.
(5)(A) If any registered securities information processor
prohibits or limits any person in respect of access to services
offered, directly or indirectly, by such securities information
processor, the registered securities information processor shall
promptly file notice thereof with the Commission. The notice shall
be in such form and contain such information as the Commission, by
rule, may prescribe as necessary or appropriate in the public
interest or for the protection of investors. Any prohibition or
limitation on access to services with respect to which a registered
securities information processor is required by this paragraph to
file notice shall be subject to review by the Commission on its own
motion, or upon application by any person aggrieved thereby filed
within thirty days after such notice has been filed with the
Commission and received by such aggrieved person, or within such
longer period as the Commission may determine. Application to the
Commission for review, or the institution of review by the
Commission on its own motion, shall not operate as a stay of such
prohibition or limitation, unless the Commission otherwise orders,
summarily or after notice and opportunity for hearing on the
question of a stay (which hearing may consist solely of the
submission of affidavits or presentation of oral arguments). The
Commission shall establish for appropriate cases an expedited
procedure for consideration and determination of the question of a
stay.
(B) In any proceeding to review the prohibition or limitation of
any person in respect of access to services offered by a registered
securities information processor, if the Commission finds, after
notice and opportunity for hearing, that such prohibition or
limitation is consistent with the provisions of this chapter and
the rules and regulations thereunder and that such person has not
been discriminated against unfairly, the Commission, by order,
shall dismiss the proceeding. If the Commission does not make any
such finding or if it finds that such prohibition or limitation
imposes any burden on competition not necessary or appropriate in
furtherance of the purposes of this chapter, the Commission, by
order, shall set aside the prohibition or limitation and require
the registered securities information processor to permit such
person access to services offered by the registered securities
information processor.
(6) The Commission, by order, may censure or place limitations
upon the activities, functions, or operations of any registered
securities information processor or suspend for a period not
exceeding twelve months or revoke the registration of any such
processor, if the Commission finds, on the record after notice and
opportunity for hearing, that such censure, placing of limitations,
suspension, or revocation is in the public interest, necessary or
appropriate for the protection of investors or to assure the
prompt, accurate, or reliable performance of the functions of such
securities information processor, and that such securities
information processor has violated or is unable to comply with any
provision of this chapter or the rules or regulations thereunder.
(c) Rules and regulations covering use of mails or other means or
instrumentalities of interstate commerce; reports of purchase or
sale of qualified securities; limiting registered securities
transactions to national securities exchanges
(1) No self-regulatory organization, member thereof, securities
information processor, broker, or dealer shall make use of the
mails or any means or instrumentality of interstate commerce to
collect, process, distribute, publish, or prepare for distribution
or publication any information with respect to quotations for or
transactions in any security other than an exempted security, to
assist, participate in, or coordinate the distribution or
publication of such information, or to effect any transaction in,
or to induce or attempt to induce the purchase or sale of, any such
security in contravention of such rules and regulations as the
Commission shall prescribe as necessary or appropriate in the
public interest, for the protection of investors, or otherwise in
furtherance of the purposes of this chapter to -
(A) prevent the use, distribution, or publication of
fraudulent, deceptive, or manipulative information with respect
to quotations for and transactions in such securities;
(B) assure the prompt, accurate, reliable, and fair collection,
processing, distribution, and publication of information with
respect to quotations for and transactions in such securities and
the fairness and usefulness of the form and content of such
information;
(C) assure that all securities information processors may, for
purposes of distribution and publication, obtain on fair and
reasonable terms such information with respect to quotations for
and transactions in such securities as is collected, processed,
or prepared for distribution or publication by any exclusive
processor of such information acting in such capacity;
(D) assure that all exchange members, brokers, dealers,
securities information processors, and, subject to such
limitations as the Commission, by rule, may impose as necessary
or appropriate for the protection of investors or maintenance of
fair and orderly markets, all other persons may obtain on terms
which are not unreasonably discriminatory such information with
respect to quotations for and transactions in such securities as
is published or distributed by any self-regulatory organization
or securities information processor;
(E) assure that all exchange members, brokers, and dealers
transmit and direct orders for the purchase or sale of qualified
securities in a manner consistent with the establishment and
operation of a national market system; and
(F) assure equal regulation of all markets for qualified
securities and all exchange members, brokers, and dealers
effecting transactions in such securities.
(2) The Commission, by rule, as it deems necessary or appropriate
in the public interest or for the protection of investors, may
require any person who has effected the purchase or sale of any
qualified security by use of the mails or any means or
instrumentality of interstate commerce to report such purchase or
sale to a registered securities information processor, national
securities exchange, or registered securities association and
require such processor, exchange, or association to make
appropriate distribution and publication of information with
respect to such purchase or sale.
(3)(A) The Commission, by rule, is authorized to prohibit brokers
and dealers from effecting transactions in securities registered
pursuant to section 78l(b) of this title otherwise than on a
national securities exchange, if the Commission finds, on the
record after notice and opportunity for hearing, that -
(i) as a result of transactions in such securities effected
otherwise than on a national securities exchange the fairness or
orderliness of the markets for such securities has been affected
in a manner contrary to the public interest or the protection of
investors;
(ii) no rule of any national securities exchange unreasonably
impairs the ability of any dealer to solicit or effect
transactions in such securities for his own account or
unreasonably restricts competition among dealers in such
securities or between dealers acting in the capacity of market
makers who are specialists in such securities and such dealers
who are not specialists in such securities, and
(iii) the maintenance or restoration of fair and orderly
markets in such securities may not be assured through other
lawful means under this chapter.
The Commission may conditionally or unconditionally exempt any
security or transaction or any class of securities or transactions
from any such prohibition if the Commission deems such exemption
consistent with the public interest, the protection of investors,
and the maintenance of fair and orderly markets.
(B) For the purposes of subparagraph (A) of this paragraph, the
ability of a dealer to solicit or effect transactions in securities
for his own account shall not be deemed to be unreasonably impaired
by any rule of an exchange fairly and reasonably prescribing the
sequence in which orders brought to the exchange must be executed
or which has been adopted to effect compliance with a rule of the
Commission promulgated under this chapter.
(4) The Commission is directed to review any and all rules of
national securities exchanges which limit or condition the ability
of members to effect transactions in securities otherwise than on
such exchanges.
(5) No national securities exchange or registered securities
association may limit or condition the participation of any member
in any registered clearing agency.
(d) National Market Advisory Board
(1) Not later than one hundred eighty days after June 4, 1975,
the Commission shall establish a National Market Advisory Board
(hereinafter in this section referred to as the "Advisory Board")
to be composed of fifteen members, not all of whom shall be from
the same geographical area of the United States, appointed by the
Commission for a term specified by the Commission of not less than
two years or more than five years. The Advisory Board shall consist
of persons associated with brokers and dealers (who shall be a
majority) and persons not so associated who are representative of
the public and, to the extent feasible, have knowledge of the
securities markets of the United States.
(2) It shall be the responsibility of the Advisory Board to
formulate and furnish to the Commission its views on significant
regulatory proposals made by the Commission or any self-regulatory
organization concerning the establishment, operation, and
regulation of the markets for securities in the United States.
(3)(A) The Advisory Board shall study and make recommendations to
the Commission as to the steps it finds appropriate to facilitate
the establishment of a national market system. In so doing, the
Advisory Board shall assume the responsibilities of any advisory
committee appointed to advise the Commission with respect to the
national market system which is in existence at the time of the
establishment of the Advisory Board.
(B) The Advisory Board shall study the possible need for
modifications of the scheme of self-regulation provided for in this
chapter so as to adapt it to a national market system, including
the need for the establishment of a new self-regulatory
organization (hereinafter in this section referred to as a
"National Market Regulatory Board" or "Regulatory Board") to
administer the national market system. In the event the Advisory
Board determines a National Market Regulatory Board should be
established, it shall make recommendations as to:
(i) the point in time at which a Regulatory Board should be
established;
(ii) the composition of a Regulatory Board;
(iii) the scope of the authority of a Regulatory Board;
(iv) the relationship of a Regulatory Board to the Commission
and to existing self-regulatory organizations; and
(v) the manner in which a Regulatory Board should be funded.
The Advisory Board shall report to the Congress, on or before
December 31, 1976, the results of such study and its
recommendations, including such recommendations for legislation as
it deems appropriate.
(C) In carrying out its responsibilities under this paragraph,
the Advisory Board shall consult with self-regulatory
organizations, brokers, dealers, securities information processors,
issuers, investors, representatives of Government agencies, and
other persons interested or likely to participate in the
establishment, operation, or regulation of the national market
system.
(e) National markets system for security futures products
(1) Consultation and cooperation required
With respect to security futures products, the Commission and
the Commodity Futures Trading Commission shall consult and
cooperate so that, to the maximum extent practicable, their
respective regulatory responsibilities may be fulfilled and the
rules and regulations applicable to security futures products may
foster a national market system for security futures products if
the Commission and the Commodity Futures Trading Commission
jointly determine that such a system would be consistent with the
congressional findings in subsection (a)(1) of this section. In
accordance with this objective, the Commission shall, at least 15
days prior to the issuance for public comment of any proposed
rule or regulation under this section concerning security futures
products, consult and request the views of the Commodity Futures
Trading Commission.
(2) Application of rules by order of CFTC
No rule adopted pursuant to this section shall be applied to
any person with respect to the trading of security futures
products on an exchange that is registered under section 78f(g)
of this title unless the Commodity Futures Trading Commission has
issued an order directing that such rule is applicable to such
persons.
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