§ 78k-1. — National market system for securities; securities information processors.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC78k-1]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B--SECURITIES EXCHANGES
Sec. 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''.)
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\1\ So in original. Probably should be ``are hereinafter''.
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(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.
(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.
Section Referred to in Other Sections
This section is referred to in sections 78n, 78y of this title.
