CITE

    15 USC Sec. 78k-1                                           01/08/2008

EXPCITE

    TITLE 15 - COMMERCE AND TRADE
    CHAPTER 2B - SECURITIES EXCHANGES

HEAD

    Sec. 78k-1. National market system for securities; securities
      information processors

STATUTE

    (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.

SOURCE

    (June 6, 1934, ch. 404, title I, Sec. 11A, as added Pub. L. 94-29,
    Sec. 7, June 4, 1975, 89 Stat. 111; amended Pub. L. 98-620, title
    IV, Sec. 402(14), Nov. 8, 1984, 98 Stat. 3358; Pub. L. 100-181,
    title III, Secs. 313, 314, Dec. 4, 1987, 101 Stat. 1256; Pub. L.
    106-554, Sec. 1(a)(5) [title II, Sec. 206(c)], Dec. 21, 2000, 114
    Stat. 2763, 2763A-430.)

REFERENCES IN TEXT

      The Federal Advisory Committee Act, referred to in subsec.
    (a)(3)(A), is Pub. L. 92-436, Oct. 6, 1972, 86 Stat. 770, as
    amended, which is set out in the Appendix to Title 5, Government
    Organization and Employees.

AMENDMENTS

      2000 - Subsec. (e). Pub. L. 106-554 added subsec. (e).
      1987 - Subsec. (b)(2). Pub. L. 100-181, Sec. 313(1), substituted
    "transactions" for "transaction".
      Subsec. (c)(4). Pub. L. 100-181, Sec. 313(2), struck out "On or
    before the ninetieth day following June 4, 1975, the Commission
    shall (i) report to the Congress the results of its review,
    including the effects on competition of such rules, and (ii)
    commence a proceeding in accordance with the provisions of section
    78s(c) of this title to amend any such rule imposing a burden on
    competition which does not appear to the Commission to be necessary
    or appropriate in furtherance of the purposes of this chapter. The
    Commission shall conclude any such proceeding within ninety days of
    the date of publication of notice of its commencement."
      Subsec. (e). Pub. L. 100-181, Sec. 314, struck out subsec. (e)
    which read as follows: "The Commission is authorized and directed
    to make a study of the extent to which persons excluded from the
    definitions of 'broker' and 'dealer' maintain accounts on behalf of
    public customers for buying and selling securities registered under
    section 78l of this title and whether such exclusions are
    consistent with the protection of investors and the other purposes
    of this chapter. The Commission shall report to the Congress, on or
    before December 31, 1976, the results of its study together with
    such recommendations for legislation as it deems advisable."
      1984 - Subsec. (c)(4). Pub. L. 98-620 struck out designation
    "(A)" after "(4)", and struck out subpar. (B) which provided that
    review pursuant to section 78y(b) of this title of any rule
    promulgated by the Commission in accordance with any proceeding
    commenced pursuant to this paragraph would, except as to causes the
    court considers of greater importance, take precedence on the
    docket over all other causes and had to be assigned for
    consideration at the earliest practicable date and expedited in
    every way.
                     EFFECTIVE DATE OF 1984 AMENDMENT
      Amendment by Pub. L. 98-620 not applicable to cases pending on
    Nov. 8, 1984, see section 403 of Pub. L. 98-620, set out as an
    Effective Date note under section 1657 of Title 28, Judiciary and
    Judicial Procedure.
                              EFFECTIVE DATE
      Section effective June 4, 1975, except for subsec. (b) which is
    effective 180 days after June 4, 1975, see section 31(a) of Pub. L.
    94-29, set out as a note under section 78b of this title.
                    TERMINATION OF ADVISORY COMMITTEES
      Advisory committees established after Jan. 5, 1973, to terminate
    not later than the expiration of the 2-year period beginning on the
    date of their establishment, unless, in the case of a committee
    established by the President or an officer of the Federal
    Government, such committee is renewed by appropriate action prior
    to the expiration of such 2-year period, or in the case of a
    committee established by the Congress, its duration is otherwise
    provided for by law. See section 14 of Pub. L. 92-463, Oct. 6,
    1972, 86 Stat. 776, set out in the Appendix to Title 5, Government
    Organization and Employees.

FOOTNOTE

    (!1) So in original. Probably should be "are hereinafter".