36482 Federal Register / Vol. 65, No. 111 / Thursday, June 8, 2000 / Notices

4 15 U.S.C. 78f(b)(5). 5 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3Nasdaq originally filed the proposal of May 11,

2000, pursuant to Section 19(b)(2) of the Act. 15

U.S.C. 78s(b)(2). On May 17, 2000, Nasdaq

submitted a letter from Robert E. Aber, Senior Vice

President and General Counsel, Nasdaq, to Alton

Harvey, Division of Market Regulation,

Commission, amending the proposal (‘‘Amendment

No. 1’’). In Amendment No. 1, Nasdaq requested

that the Commission consider the proposal under

Section 19(b)(3)(A) of the Act. 15 U.S.C.

78s(b)(3)(A). Because Nasdaq amended the proposal

to file it under Section 19(b)(3)(A) of the Act, the

Commission considers the proposal re-filed as of

the date of the amendment. Therefore, the date of

the amendment is deemed the date of the filing of

the proposal.

members of the Committee and convene

a meeting to make these decisions. It is

also not practicable to expect these

members to monitor the situation when

they are trying to conduct a business on

the floor that requires their attention.

Intra-day meetings are not only

impracticable to convene but would

distract these members from the

conduct of their business on the floor.

Consequently, the EFPC has

determined to delegate its authority

under CBOE Rule 6.8 to the Chairman

of the EFPC, or to the Chairman’s

designee, to decrease the eligible order

size for RAES in unusual market

conditions provided that the Chairman

or his designee believes the action is

warranted and provided the decision is

made for no more than one trading day

(as is currently the case for the

Chairman increasing the order size

eligibility for RAES). As proposed, to

the extent the conditions exist on the

following trading day, the Chairman or

his designee must review the situation

and make an independent decision to

decrease the RAES eligible order size for

that subsequent day. Further, any

decisions made by the Chairman or his

designee to decrease the RAES eligible

order size for a particular option class

for consecutive days will be reviewed

by the FPC at its next regularly

scheduled meeting. After reviewing

these decisions the FPC can provide

guidance to the Chairman or his

designee about the use of this authority

if they feel it is appropriate.

2. Statutory Basis

By allowing the Chairman of the

appropriate FPC or his designee to make

decisions to decrease the eligible order

size for RAES, the Exchange can sustain

the operation of RAES during unusual

market conditions in an efficient

manner. The filing, therefore, is

consistent with and furthers the

objectives of Section 6(b)(5) of the Act 4

in that it is designed to promote just and

equitable principles of trade, to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system, and to

protect investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE does not believe that the

proposed rule change will impose any

burden on competition 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

No written comments were solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period:

(i) As the Commission may designate up

to 90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding; or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(A) by order approve such proposed

rule change, or

(B) institute proceedings to determine

whether the proposed rule change

should be disapproved.

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

Section, 450 Fifth Street NW,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the CBOE. All submissions

should refer to SR–CBOE–00–10 and

should be submitted by June 29, 2000.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14405 Filed 6–7–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42869; File No. SR–NASD–

00–28]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

National Association of Securities

Dealers, Inc. Relating to TradeReporting of Average-Price Trades in

Nasdaq-Listed Securities

May 31, 2000.

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 May 17,

2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its wholly

owned subsidiary the Nasdaq Stock

Market, Inc. (‘‘Nasdaq’’), filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by Nasdaq. On May 17, 2000,

Nasdaq submitted Amendment No. 1 to

the proposed rule change.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq proposes to require all

transaction in Nasdaq-listed securities

that are done on a weighted average

basis or effected based on other specialpricing formulae, to be reported with a

special .W indicator. Proposed deletions

are in brackets.

* * * * *

Rule 4632. Transaction Reporting

(a)(1)–(5) No Change.

(6) All members shall report [agency cross]

transactions occurring at prices based on

average-weighting or other special-pricing

formulae to Nasdaq using a special indicator,

as designated by the Association and set out

in the Symbol Directory.

Federal Register / Vol. 65, No. 111 / Thursday, June 8, 2000 / Notices 36483

4See SR–NASD–00–21.

5All times mentioned in this proposal are Eastern

Standard times.

6See Securities Exchange Act Release No. 42003

(October 13, 1999), 64 FR 56554 (October 20, 1999)

(order approving File No. SR–NASD–99–57 on a

pilot basis).

(7)–(8) No Change.

(b)–(f) No Change.

Rule 4642. Transaction Reporting

(a)(1)–(5) No Change.

(6) All members shall report [agency cross]

transactions occurring at prices based on

average-weighting or other special-pricing

formulae to Nasdaq using a special indicator,

as designated by the Association and set out

in the Symbol Directory.

(7)–(8) No Change.

(b)–(f) 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,

Nasdaq 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. Nasdaq 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

Recently, the NASD filed SR–NASD–

00–21 with the Commission to amend

Rule 6420, Transaction Reporting, to

require all transactions in exchangelisted securities that are executed in the

over-the-counter market (i.e., in the

‘‘Third Market’’) and that are executed

on a weighted average or other specialpricing basis to be reported with a .W

indicator.4 The purpose of SR–NASD–

00–21 is to increase pricing

transparency and eliminate investor

confusion that could occur if investors

see prints go across the tape that are

unrelated to the current market. Faced

with similar concerns for Nasdaq-listed

securities, Nasdaq proposes in this filing

to amend NASD Rules 4632 and 4642,

to require all transactions (not just

agency crosses) in Nasdaq-listed

securities that are executed on a

weighted-average or other specialpricing formulae basis to be reported

with a .W trade modifier.

By way of background, prior to

proposing the amendments to NASD

Rule 6420 for the listed environment,

the NASD learned that a sizable number

of trades in exchange-listed securities

effected in the Third Market after hours

are volume-weighted/special-pricing

formula transactions, which are effected

on a principal or riskless principal

basis. These volume-weighted/specialpricing formula trades are often effected

at a price unrelated to the close—or if

effected during the trading day, the last

sale—on the primary exchange. These

trades are then reported to the NASD

and the consolidated tape without a

special modifier to denote they are

being effected at a price unrelated to the

last sale on the primary exchange.

Because these trades are not effected as

agency crosses and thus not subject to

the .W reporting requirement in NASD

Rule 6420(a)(6), they are reported to the

NASD and the consolidated tape

without a modifier. Consequently, these

weighted average/special-pricing

formula trades affect the reporting to the

media and vendors of the last sale in the

exchange-listed security. The reporting

of trades on a weighted average/specialpricing formulae basis without a

modifier creates investor confusion

regarding the last sale price. Moreover,

there exists the potential for disorderly

markets when a security opens the next

day on the primary exchange at a price

that, although related to the last sale on

the primary exchange, is unrelated to

the last reported price that was effected

on a weighted average basis on the

previous day prior to 6:30 p.m. Eastern

Time.5 In response to these concerns,

the NASD recently proposed to amend

NASD Rule 6420 to require a .W trade

modifier for all weighted average price

trades, not just those effected on an

agency-cross basis. This proposal (SR–

NASD–00–21) currently is pending

before the Commission.

Nasdaq believes that many of the

same concerns associated with last sale

reporting of weighted average or specialpriced formula trades that exist for

listed securities also exist for Nasdaq

securities. In an effort to reduce investor

confusion by increasing pricing

transparency for last sale data, Nasdaq

proposes to amend NASD Rules 4632

and 4642 to require the .W modifier for

all weighted average and special-pricing

formula trades that occur in Nasdaqlisted securities.

Specifically, NASD Rules 4632(a)(6)

and 4642(a)(6) require members to

append a .W to a trade report when

effecting transactions occurring at prices

based on average-weighting or other

special-pricing formulae in the security.

When adopted, the scope of Rules

4632(a)(6) and 4642(a)(6) was limited to

agency cross trades effected on a

weighted average or other specialpricing formulae basis because a

majority of the trades, at the time, were

being effected on an agency-cross basis.

Since 1992, the market has changed in

many ways. In particular, Nasdaq

recently amended a number of its rules

to allow certain systems, including the

Automated Confirmation and

Transaction System (‘‘ACT’’), to stay

open until 6:30 p.m. to facilitate the

reporting of trades executed afterhours. 6 As part of this initiative, Nasdaq

amended Rules 4632 and 4642 to

require members to report within 90

seconds transactions effected between

9:30 a.m. and 6:30 p.m. Prior to this

change, the 90 second trade-reporting

requirement applied to transactions

effected between 9:30 a.m. and 5:15

p.m. and transaction effected between

5:15 and 6:30 p.m. were not subject to

90 second trade reporting requirements.

Rather, such transactions were reported

the next day (i.e., T+1) on an ‘‘as of’’

basis.

One effect of the after-hours rule

changes has been to subject transactions

that previously were reported on an ‘‘as

of’’ basis, T+1—because they were

effected between 5:15 p.m. and 6:30—to

90 second trade reporting requirements.

Similar to the listed environment,

Nasdaq recently has learned that a

sizable number of trades effected during

the 5:15 p.m. and 6:30 p.m. time period

are volume-weighted or special-pricing

formula transactions, which are effected

on a principal or riskless principal

basis. These trades are often effected at

a price unrelated to the close or if

effected during the trading day, the last

sale on Nasdaq. Because these trades are

not executed as agency crosses, they are

not subject to the .W reporting

requirements in Rules 4632(a)(6) and

4642(a)(6). Thus, these trades are

reported to the tape without a modifier.

Nasdaq believes that there is the

potential for investor confusion because

these trades are often effected at a price

unrelated to the current market, yet

investors have no way of knowing this

from the media report. Thus, investors

may believe that the trade they are

seeing represents the current market,

when in actuality, the trade represents

a price determined by a special formula.

As a short-term method of alleviating

confusion before this rule change could

be proposed, the Nasdaq requested that

NASD members report these weighted

average trades effected between 4:00

and 6:30 p.m., on an ‘‘as of’’ basis, T+1.

In light of the foregoing efforts, the

Nasdaq proposes to amend NASD Rules

4632 and 4642 to require all

36484 Federal Register / Vol. 65, No. 111 / Thursday, June 8, 2000 / Notices

7 15 U.S.C. 78o–3(b)(6).

8 15 U.S.C. 78k–1(a)(1)(C)(iii).

9The Commission notes that Nasdaq gave the

Commission notice of its intent to file the proposed

rule change through its original filing of the

proposal pursuant to Section 19(b)(2) of the Act on

May 11, 2000.

10 15 U.S.C. 78s(b)(3)(A).

11 17 CFR 240.19b–4(f)(6).

12 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See Letter to Jack Drogin, Senior Special

Counsel, Division of Market Regulation,

Commission, from Robert E. Aber, Senior Vice

President and General Counsel, Nasdaq, dated April

7, 2000 (‘‘Amendment No. 1’’). Amendment No. 1

clarifies that the proposed time frame for gaining

compliance with the continued inclusion market

capitalization standards applies to issuers listed on

both The Nasdaq SmallCap Market and the Nasdaq

National Market. In addition, Amendment No. 1

clarified that the method for regaining compliance

with the continued inclusion requirement for the

number of market makers set forth in Rule

4310(c)(8)(A) applies to issuers listed on both The

Nasdaq SmallCap Market and the Nasdaq National

Market. Finally, Amendment No. 1 makes certain

technical corrections to the proposed rule change. 4See Letter to Jack Drogin, Senior Special

Counsel, Division of Market Regulation,

Commission, from Robert E. Aber, Senior Vice

President and General Counsel, Nasdaq, dated April

25, 2000 (‘‘Amendment No. 2’’). Amendment No. 2

clarifies that Rule 4310(c)(8)(C) is being amended to

specify time frames for determining when an issuer

is non-compliant or has regained compliance with

the Association’s market capitalization standards.

Amendment No. 2 also clarifies that the NASD’s

Rule 4300 series contains the qualification

requirements for all securities included in The

Nasdaq Stock Market while the Rule 4400 Series

sets forth additional requirements for those

securities designated for the Nasdaq National

Market.

transactions, not just agency crosses, in

Nasdaq-listed securities that are based

on a weighted average or other specialpricing formulae, to be reported with

the .W modifer.

2. Statutory Basis

Nasdaq believes that the proposed

rule change is consistent with Section

15A(b)(6) 7 of the Act. Among other

things, Section 15A(b)(6) requires that

the rules of a national securities

association be designed to prevent

fraudulent and manipulative acts and

practices, to promote just and equitable

principles of trade, to foster cooperation

and coordination with persons engaged

in regulating, clearing, settling,

processing information with respect to,

and facilitating transactions in

securities, to remove impediments to

and perfect the mechanism of a free and

open market and a national market

system and in general to protect

investors and the public interest. In

addition, the Nasdaq believes that the

proposed rule change furthers the

objective set forth in Section

11A(a)(1)(C)(iii) 8 of the Act by ensuring

the availability to brokers, dealers and

investors of information with respect to

quotations for and transactions in

securities. Nasdaq believes that

reporting transactions in exchangelisted securities that are marked with a

special indicator to identify their unique

pricing formulae is appropriate for

regulatory purposes and reduces

investor confusion with regard to these

transactions.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Nasdaq 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

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) does not become operative for 30

days from May 17, 2000, the date on

which it was filed and, since the

Exchange provided the Commission

with written notice of its intent to file

the proposed rule change at least five

business days prior to the filing date,9

the proposed rule change has become

effective pursuant to Section 19(b)(3)(A)

of the Act 10 and subparagraph (f)(6) of

Rule 19b–4 thereunder.11

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.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule 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 the NASD. All

submissions should refer to File No.

SR–NASD–00–28 and should be

submitted by June 29, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14407 Filed 6–7–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42876; File No. SR–NASD–

99–69]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Clarifying Certain Listing

Standards of The Nasdaq Stock

Market, Inc.

May 31, 2000.

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 November

22, 1999, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’) through its wholly

owned subsidiary, The Nasdaq Stock

Market, Inc. (‘‘Nasdaq’’), 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 Nasdaq. The Association

submitted Amendments No. 1 3 and No.

2 4 to the proposed rule change on April

10, 2000, and April 27, 2000,

respectively. The Commission is

publishing this notice to solicit

comments on the proposed rule change,

as amended, from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq has filed with the

Commission a proposed rule change to