Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices 39457

5 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

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 in Washington, D.C. Copies of

such filing will also be available for

inspection and copying at MBSCC’s

principal office. All submissions should

refer to File No. SR–MBSCC–00–01 and

should be submitted by July 17, 2000.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–16064 Filed 6–23–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42958; File No. SR–NASD–

00–20]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to Amendments

to Rule 2320(g) and Rule 3110(b)

June 20, 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 April 13,

2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its wholly

owned subsidiary, NASD Regulation,

Inc. (‘‘NASD Regulation’’) 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 NASD Regulation. 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

NASD Regulation is proposing to

amend NASD Rules 2320(g) and

3110(b): (1) To require that members

executing a customer order in a nonNasdaq security contact and obtain

quotations from three dealers (or all

dealers if three or less) to determine the

best inter-dealer market for security,

unless two or more priced quotations

are displayed in an inter-dealer

quotation system that permits quotation

updates on a real-time basis (such as the

OTC Bulletin Board (‘‘OTCBB’’) or the

electronic pink sheets); (2) to require

that members that display priced

quotations for the same non-Nasdaq

security in two or more quotation

mediums that permit quotation updates

on a real-time basis display the same

priced quotations for the security in

each quotation medium; (3) to eliminate

the requirement that a member indicate

on the order ticket for each transaction

in a non-Nasdaq security the name of

each broker-dealer contacted and the

quotations received, if two or more

priced quotations are displayed and

NASD Regulation has access, on a

historical basis, to the quotation data;

and (4) to define the terms inter-dealer

quotation system and quotation medium

for the purposes of the proposed rule

change.

Below is the text of the proposed rule

change. Proposed new language is in

italics; proposed deletions are in

brackets.

2320. Best Execution and

Interpositioning

(a) through (f) No Change.

(g)(1) Unless two or more priced

quotations for a non-Nasdaq security (as

defined in the Rule 6700 Series) are

displayed in an inter-dealer quotation

system that permits quotation updates

on a real-time basis, [I]in any

transaction for or with a customer

pertaining to the execution of an order

in a non-Nasdaq security [(as defined in

the Rule 6700 Series)], a member or

person associated with a member, shall

contact and obtain quotations from three

dealers (or all dealers if three or less) to

determine the best inter-dealer market

for the subject security.

(2) Members that display priced

quotations on a real-time basis for a

non-Nasdaq security in two or more

quotation mediums that permit

quotation updates on a real-time basis

must display the same priced quotations

for the security in each medium.

(3) For purposes of this paragraph, the

term ‘‘inter-dealer quotation system’’

means any system of general circulation

to brokers or dealers that regularly

disseminates quotations of identified

brokers or dealers.

(4) For purposes of this paragraph, the

term ‘‘quotation medium’’ means any

inter-dealer quotation system or any

publication or electronic

communications network or other

device that is used by brokers or dealers

to make known to others their interest

in transactions in any security,

including offers to buy or sell at a stated

price or otherwise, or invitations of

offers to buy or sell.

(5) Pursuant to the Rule 9600 Series,

the staff, for good cause shown, after

taking into consideration all relevant

factors, may exempt any transaction or

classes of transactions, either

unconditionally or on specified terms,

from any or all of the provisions of this

paragraph if it determines that such

exemption is consistent with the

purpose of this Rule, the protection of

investors, and the public interest.

* * * * *

3110. Books and Records

(a) No Change

(b)(1) No Change

(b)(2) A person associated with a

member shall indicate on the

memorandum for each transaction in a

non-Nasdaq security, as that term is

defined in the Rule 6700 Series, the

name of each dealer contacted and the

quotations received to determine the

best inter-dealer market; however, the

requirements of this subparagraph shall

not apply if two or more priced

quotations for the security are displayed

in an inter-dealer quotation system, as

defined in Rule 2320(g), that permits

quotation updates on a real-time basis

for which NASD Regulation has access

to historical quotation information.

* * * * *

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NASD Regulation included statements

concerning the purposes 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.

NASD Regulation has prepared

summaries, set forth in Sections A, B,

and C below, of the most significant

aspects of such statements.

39458 Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices

3See Exchange Act Release No. 25637 (May 2,

1988), 53 FR 16488 (May 9, 1988).

4Currently, if three firm quotations are displayed,

a broker-dealer is not required to call the three

market makers to verify the firm quotations that are

displayed on the screen. A broker-dealer need note

on the order ticket only the identity of the brokerdealers and the firm quotations displayed.

5See NASD Rule 2320(a).

6NASD Regulation currently is soliciting

comment on a rule proposal that would require

members to record and report their quotation data

in the electronic pink sheets or similar quotation

systems to NASD Regulations. See NASD Notice to

Members 00–17 (Mar. 2000). 7 15 U.S.C. 78o–3(b)(6).

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

Rule 2320(g) (‘‘Three Quote Rule’’ was

originally adopted on May 2, 1988 3 as

an amendment to the NASD’s best

execution interpretation. Specifically,

the Three Quote Rule requires members

that execute transactions in non-Nasdaq

securities on behalf of customers to

contact a minimum of three dealers (or

all dealers if three or fewer) and obtain

quotations in determining the best interdealer market.4 The intent of the Three

Quote Rule is to create a standard to

help ensure that members fulfill their

best execution responsibilities to

customers in non-Nasdaq securities,

particularly in transactions involving

relatively illiquid securities with nontransparent prices. The Three Quote

Rule is a minimum standard, and

compliance with the rule, in and of

itself, does not mean a member has met

its best execution obligations. Best

execution requires each member to use

reasonable diligence to ascertain the

best inter-dealer market for a security,

and to buy or sell in that market so that

the resultant price to the customer is as

favorable as possible under prevailing

market conditions. 5

Since the adoption of the Three Quote

Rule, the market for non-Nasdaq

securities has changed dramatically. For

example, from 1996 to 1999, the OTCBB

experienced growth of 72 percent in

market maker positions, 421 percent in

average daily share volume, and 65

percent in average daily dollar volume.

Given the rapid growth in the market

for non-Nasdaq securities, NASD

Regulation believes that the current

Three Quote Rule often hinders, rather

than furthers, investor protection by

causing significant delays in obtaining

executions of customer orders. The costs

associated with delayed executions

resulting from compliance with the

Three Quote Rule are not outweighed by

the benefits of obtaining three telephone

quotes. Indeed, NASD Regulation

believes that the informational value of

three telephone quotes is significantly

less than the informational value of two

transparent, firm quotes in terms of

obtaining best execution for customers.

Therefore, NASD Regulation is

proposing that Rule 2320(g) be amended

to require members to obtain quotations

from three dealers (or all dealers if three

or less) only when there are fewer than

two priced quotations displayed in an

inter-dealer quotation system that

permits quotation updates on a real-time

basis (such as the OTCBB or the

electronic pink sheets). The proposed

rule change defines the term inter-dealer

quotation system as any system of

general circulation to brokers or dealers

that regularly disseminates quotations of

identified brokers or dealers.

NASD Regulation believes the

proposed rule change would enhance

investor protection by reducing

execution delays, while improving the

quality of information relied upon by

firms in seeking to obtain best

execution. As with the current rule, the

proposed rule change would not limit or

change a member’s general best

execution obligations.

The proposed rule change also would

require members that display priced

quotations for the same security in two

or more quotation mediums that permit

quotation updates on a real-time basis to

display the same priced quotations in

each system. The proposed rule change

defines the term quotation medium as

any inter-dealer quotation system or any

publication or electronic

communications network or other

device that is used by brokers or dealers

to make known to others their interest

in transactions in any security,

including offers to buy or sell at a stated

price or otherwise, or invitations of

offers to buy or sell.

NASD Regulation believes that

members’ displaying different priced

quotations in different quotation

mediums for the same security can be

confusing and misleading to other

market participants and, more

importantly, to public investors.

Moreover, requiring that members

display consistent priced quotations in

multiple quotation mediums would

enhance the ability of other market

participants to ascertain the best interdealer market for a security.

In addition, Rule 3110(b)(2) currently

requires that members indicate on the

order ticket for each transaction in a

non-Nasdaq security the name of each

dealer contacted and the quotations

received to determine the best interdealer market. Under the proposed rule

change, members would not be required

to note such information on the order

ticket if two or more priced quotations

are displayed and NASD Regulations

has access to the quotation data. As a

result, the proposed rule change would

alleviate certain recordkeeping burdens

for members where NASD Regulation

can validate and confirm compliance

with applicable requirements directly

through its internal historical data.

Currently, NASD Regulation has such

data with respect to the OTCBB

securities, although it does not have

access to historical quotation data for

the electronic pink sheets.6

2. Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

the provisions of Section 15A(b)(6) of

the Act 7 which requires, among other

things, that the Association’s rules be

designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, and, in general, to protect

investors and the public interest. The

NASD believes that the proposed rule

change would reduce the time and effort

necessary in contacting three market

makers when there are at least two

priced quotations displayed, while

potentially enabling members to provide

customers better executions in nonNasdaq securities than is provided

under existing requirements.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation does not believe

that the proposed rule change would

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

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 NASD 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.

Federal Register / Vol. 65, No. 123 / Monday, June 26, 2000 / Notices 39459

8 17 CFR 200.30–3(a)(12).

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

2 17i CFR 240.19b–4.

3 In Amendment No. 1, the NYSE made technical

changes to the proposed rule text. See letter from

Daniel P. Odell, Assistant Secretary, NYSE, to

Nancy dSanow, Senior Special Counsel, Division of

Market Regulation, SEC, dated May 1, 2000

(‘‘Amendment No. 1’’).

4When the Exchange amended Section 802.01C

of the Manual in SR–NYSE–00–12, the Exchange

did not amend NYSE Rule 499 to reflect the

Continued

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 the File No.

SR–NASD–00–20 and should be

submitted by July 17, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–16063 Filed 6–23–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42954; File No. SR–NYSE–

100–8]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed rule

Change and Amendment No. 1 Thereto

by the New York Stock Exchange, Inc.

Relating to the Exchange’s PrideBased Continued Listing Standards

June 19, 2000.

Pursuant to Section 19(b)(12) of the

Securities Exchange Act 1 of 1934

(‘‘Act’’), and Rule 19b–4 thereunder,2

notice is hereby given that on February

22, 2000, the New York Stock Exchange,

Inc. (‘‘NYSE’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed; rule change as described

in Items I, and II below, which Items

have been prepared by the Exchange.

On May 3, 2000, the Exchange

submitted Amendment No. 1 to the

proposed rule change.3 The Commission

is publishing this notice to solicit

comments on the proposed rule change,

as amended, from interested persons

and to grant accelerated approval to the

proposed rule change and Amendment

No. 1.

1. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change consists of

an amendment to Section 802.01C of the

Listed Company Manual (‘‘Manual’’) of

the Exchange and corresponding

changes to NYSE Rule 499. The text of

the proposed rule change, as amended,

is as follows. New text is italicized.

NYSE Listed Company Manual

Section 8

Suspension and Delisting

801.00 Policy

* * * * *

802.00 Continued Listing

802.01 Continued Listing Criteria

* * * * *

802.01C. Price Criteria

Average closing price of a security is

less than $1.00 over a consecutive 30-

trading-day period (D).

(D) Once notified, the company must

bring its average share price back above

$1.00 by the later of its subsequent

annual meeting date or six months

following receipt of the notification. If

this is the only criteria that makes the

company below the Exchange’s

continued listing standards, the

procedures outlined in Paras. 802.20

and 802.03 do not apply. The company

must, however, notify the Exchange,

within 10 business days of receipt of the

notification, of its intent to cure this

deficiency or be subject to suspension

and delisting procedures. In the event

that at the expiration of the cure period,

a $1.00 average share price over the

preceding 30 trading days is not

attained, the Exchange will commence

suspension and delisting procedures.

Notwithstanding the foregoing, if the

subject security is not the primary

trading common stock of the company

(e.g., a tracking stock or a preferred

class) or is a stock listed under the

Affiliated Company standard where the

parent remains in ‘‘control’’ as that term

is used in that standard, the Exchange

may determine whether to apply the

Price Criteria to such security after

evaluating the financial status of the

company and/or the parent/affiliated

company, as the case may be.

* * * * *

NYSE Rules

Delisting of Securities

Suspension From Dealings or Removal

From List by Action of the Exchange

The aim of the New York Stock

Exchange is to provide the foremost

auction market for securities of wellestablished companies in which there is

a broad public interest and ownership.

Rule 499.

* * * * *

.20 NUMERICAL AND OTHER

CRITERIA—WHEN A COMPANY

FALLS BELOW ANY OF THESE

CRITERIA, THE EXCHANGE MAY GIVE

CONSIDERATION TO ANY

DEFINITIVE ACTION THAT A

COMPANY WOULD PROPOSE TO

TAKE THAT WOULD BRING IT ABOVE

CONTINUED LISTING STANDARDS.

* * * * *

9. Average closing price of a security

is less than $1.00 over a consecutive 30

trading-day period. Once notified, the

company must bring its average share

price back above $1.00 by the later of its

subsequent annual meeting date or six

months following receipt of the

notification. If this is the only criteria

that makes the company below the

Exchange’s continued listing standards,

the procedures outlined in Paras. .50

and .60 of this Rule 499 do not apply.

The company must, however notify the

Exchange, within 10 business days of

receipt of the notification, of its intent

to cure this deficiency. In the event that

at the expiration of the cure period, a

$1.00 average share price over the

preceding 30 trading days is not

attained, the Exchange will commence

suspension and delisting procedures.

Notwithstanding the foregoing, if the

subject security is not the primary

trading common stock of the company

(e.g., a tracking stock or a preferred

class) or is a stock listed under the

Affiliated Company standard where the

parent remains in ‘‘control’’ as that term

is used in that standard, the Exchange

may determine whether to apply the

Price Criteria to such security after

evaluating the financial status of the

company and/or the parent/affiliated

company, as the case may be.1