36202 Federal Register / Vol. 65, No. 110 / Wednesday, June 7, 2000 / Notices

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

2 17 CFR 240.19b–4.

3Nasdaq originally filed the proposal on April 14,

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.

4See Securities Exchange Act Release No. 29632

(August 30, 1991), 56 FR 46022 (September 9, 1991)

(order approving File No. SR–NASD–91–37).

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).

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42871; File No. SR–NASD–

00–21]

Self-Regulatory Organization; Notice of

Filing and Immediate Effectiveness of

Proposed Rule Change by the National

Association of Securities Dealers, Inc.

Relating to Trade-Reporting of

Average-Price Trades

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 amend NASD

Rule 6420, Transaction Reporting, to

require all transactions in exchangelisted securities that are executed on a

weighted average basis, or effected

based on other special pricing formulae,

to be reported with a special indicator.

Proposed deletions are in brackets.

* * * * *

Rule 6420. Transaction Reporting

(a)(1)–(5) No Change.

(6) All members shall report [agency

cross] transactions at prices based on

average-weighting or other special

pricing formulae unrelated to the

current or closing price of the security

on the primary market to Nasdaq using

a special indicator, as designated by the

Association.

(b)–(e) 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

The NASD proposes to amend NASD

Rule 6420, Transaction Reporting, to

require all transactions in exchangelisted securities executed in the overthe-counter market and done on a

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

trade modifier.

NASD Rule 6420 sets out NASD

member reporting obligations for

transactions in exchange-listed

securities effected in the over-thecounter market (i.e, third market

transaction). NASD Rule 6420(a)(6)

requires members to append a special

indicator (.W) to a trade report when

effecting agency crosses at prices based

on average-weighting or other special

pricing formulae unrelated to the

current or closing price of the security.

The NASD adopted this rule in 1994,4

in part, because these weighted-average

trades were being effected in the third

market at a price that did not relate to

the closing price on the primary

exchanges, but such trades affected the

reporting of the last sale in the exchange

listed security to the media and

vendors. Pursuant to Rule 6420, these

weighted average or special pricing

formulae trades, when reported with the

.W modifier, do not affect the last sale

price.

According to the NASD, when

adopted, the scope of Rule 6420(a)(6)

was limited to agency cross trades

effected on a weighted average basis or

other special pricing formulae because a

majority of the trades at the time were

being effected on an agency cross basis.

Since 1991, the market has changed in

many ways. In particular, the NASD

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. Eastern Time 5 to

facilitate after-hours trading.6 As part of

this initiative, the NASD amended Rule

6420 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 tradereporting 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 this rule change 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 p.m.—to 90

second trade reporting requirements.

Recently, the NASD 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 transactions,

which are effected on a principal or

riskless principal basis. These volumeweighted 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. Because

these trades are not executed as agency

crosses and thus not subject to the .W

reporting requirement in Rule

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

without a modifier and they affect the

reporting to the media and vendors of

the last sale in the exchanged-listed

security. As such, there is the potential

for disorderly markets when the 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. As a short-term

method of alleviating confusion before

this rule change could be proposed, the

NASD 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.

The NASD proposes to amend NASD

Rule 6420 to require all transactions, not

Federal Register / Vol. 65, No. 110 / Wednesday, June 7, 2000 / Notices 36203

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

April 14, 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).

2The Commission has modified the text of the

summaries prepared by NSCC.

3Securities Exchange Act Release No. 42336

(January 12, 2000), 65 FR 3514.

just agency crosses, in exchange-listed

securities that are based on a weighted

average or other special pricing

formulae, to be reported with the .W

modifier.

2. Statutory Basis

Nasdaq believes that the proposed

rule change is consistent with Section

15A(b)(6) 7of 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, Nasdaq believes that the

proposed rule change furthers the

objective set forth in Section

11A(a)(1)(C)(iii) 8of 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 will reduce

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. Person making

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, N.W., Washington, D.C.

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–00–21 and should be

submitted by June 28, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14281 Filed 6–6–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42859; File No. SR–NSCC–

00–04]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing and

Immediate Effectiveness of Proposed

Rule Change Relating to a Change in

Fee Schedule

May 30, 2000.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

April 6, 2000, the National Securities

Clearing Corporation (‘‘NSCC’’) 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 primarily by NSCC.

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

parties.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change consists of

changes to NSCC’s fee schedule.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for the Proposed Rule

Change

In its filing with the Commission,

NSCC 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. NSCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of these statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

On December 30, 1999, NSCC filed a

rule change to amend its fee schedule to

charge fees to members using its

Insurance Processing Services (‘‘IPS’’)

for the transmission of test, as well as

production, files.3 These charges

became effective on January 3, 2000.

However, in order to encourage industry

participation in pilot test development

programs, NSCC has determined that it