48912 Federal Register / Vol. 62, No. 180 / Wednesday, September 17, 1997 / Notices

1See Notice to Members 95–43.

2Securities Exchange Act Release No. 37619A

(September 6, 1996), 61 FR 48290 (September 12,

1996).

Commissioner Johnson, as duty

officer, determined that no earlier notice

thereof was possible.

At times, changes in Commission

priorities require alterations in the

scheduling of meeting items. For further

information and to ascertain what, if

any, matters have been added, deleted

or postponed, please contact: The Office

of the Secretary at (202) 942–7070.

Dated: September 15, 1997.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–24867 Filed 9–15–97; 3:55 pm]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[File No. 500–1]

Legend Sports, Inc.; Order of

Suspension of Trading

September 15, 1997.

It appears to the Securities and

Exchange Commission that there is a

lack of current and accurate information

concerning the securities of Legend

Sports, Inc. (‘‘Legends’’) because of

questions regarding, among other things,

the current financial condition of

Legends.

The Commission is of the opinion that

the public interest and the protection of

investors require a suspension of trading

in the securities of the above-listed

company.

Therefore, it is ordered, pursuant to

Section 12(k) of the Securities Exchange

Act of 1934, that trading in the abovelisted company is suspended for the

period from 9:30 a.m., EDT, September

15, 1997 through 11:59 p.m. EDT, on

September 26, 1997.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24826 Filed 9–15–97; 12:38 pm]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39049; File No. SR–NASD–

97–66]

Self-Regulatory Organization; Notice of

Filing and Immediate Effectiveness of

Proposed Rule Change by National

Association of Securities Dealers, Inc.

Relating to a Change to its Policy

Regarding Limit Order Protection

September 10, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on September 4, 1997,

the National Association of Securities

Dealers, Inc. (‘‘NASD’’) 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 the Nasdaq Stock Market,

Inc. (‘‘Nasdaq’’). The NASD and Nasdaq

have designated this proposal as one

constituting a stated policy and

interpretation with respect to the

meaning of an existing rule under

Section 19(b)(3)(A)(i) of the Act, which

renders the rule effective upon the

Commission’s receipt of this filing. 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

The NASD is proposing to amend an

interpretation to its existing Limit Order

Protection Rule, IM 2110–2.

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

The NASD has determined to revise

its existing policy interpretation

regarding a member’s trading ahead of a

customer limit order when the member

offers price improvement over that limit

order. The NASD’s Limit Order

Protection Rule, IM–2110–2 (commonly

referred to as the ‘‘Manning Rule’’),

prohibits any member from trading at

the same price as, or at a price inferior

to, a customer limit order that it holds.

When the Limit Order Protection Rule

was first expanded in 1995,1 members

inquired about the effect of this rule on

their trading activity when the member

traded with another customer at a price

better than the customer limit order. Of

particular concern was the amount

better at which a member could trade

without violating the Manning Rule. In

Notice To Members 95–43, the NASD

interpreted the Manning Rule to require

members to trade at least 1⁄64th better

than the held customer limit order.

Since the statement of this policy in

Notice To Members 95–43, several

significant changes have occurred in

The Nasdaq Stock Market, including the

SEC’s adoption of the Order Execution

Rules, in particular Rule 11Ac1–4,

refinements to best execution policies as

stated in the SEC’s release adopting the

Order Execution Rules,2 and the move

to quotation increments of sixteenths.

These changes to improve the treatment

of customer orders have resulted in reevaluation by the NASD of its Manning

Rule policy regarding price

improvement. The new policy is set

forth below and will be announced to

all members in Notice To Members 97–

57 (September, 1997).

To enable members to understand the

new policy the Notice will set out the

following example:

• Nasdaq Inside Market: 20—201⁄4 (10

× 10).

• MMA receives a customer limit

order to buy at 201⁄16 for 2,000 shares.

• MMA changes its quote to 201⁄16 for

2,000 shares to reflect the price of the

customer limit order.

• MMA receives a market order to sell

2,500 shares.

May MMA offer the market price

improvement over the 201⁄16th limit

order and execute the market order for

its own account? If so, what is the

minimum amount of price improvement

allowable?

Under the new policy, MMA is

allowed to execute the market order at

a price better than the limit order.

However, the NASD and Nasdaq, after

consultation with the Quality of Markets

Committee, believe that the minimum

amount of price improvement that

would permit a market maker to avoid

a violation of the Manning Rule is 1⁄16th,

where the actual quotation spread is

greater than 1⁄16th; however, where the

actual quotation spread is the minimum

quotation increment, the minimum

price improvement is one-half of the

normal minimum quote increment. In

the example above, since the actual

spread is 201⁄16—201⁄4, the minimum

price improvement is 1⁄16th. Thus, MMA

could trade ahead of the limit order at

201⁄8th. If the actual spread were

201⁄16—201⁄8, since the security is priced

at more than $10 per share, the

minimum quote increment is 1⁄16th. If

the market maker want to trade with an

incoming market order to sell without
Federal Register / Vol. 62, No. 180 / Wednesday, September 17, 1997 / Notices 48913

3 15 U.S.C. § 78o–3.

4 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 38759

(June 23, 1997), 62 FR 34725.

3Securities Exchange Act Release No. 37515

(August 2, 1996), 61 FR 41677.

4The Program’s procedures also included the

following: (1) all prefunding return transactions are

subject to PTC’s standard credit checks (i.e.,

prefunding payments may be returned only if the

participant will be within its net free equity and net

debit monitoring level requirements after the

prefunding payments are returned); (20 during the

initial stage of the pilot program, only 80% of

qualifying prefunding payments are eligible for

return; (3) participants are allowed only one request

per day; and (4) the minimum amount eligible for

return is $10 million. The proposed rule change

does not amend these procedures.

5Supra note 3, at n. 4.

triggering its Manning obligations to the

buy limit order, the market maker must

buy from the sell order at 203⁄32nds.

Similarly, if the security were priced

under $10 and quoted at 51⁄32—51⁄16, the

minimum price improvement to avoid a

violation of the Manning Rule would be

1⁄64th better than a buy limit order it

holds.

This represents a change from

previous statements regarding price

improvement. In Notice To Members

95–43, regarding the Manning Rule, the

NASD and Nasdaq stated that market

makers may avoid violating Manning if

they execute for their own accounts at

1⁄64th better than the limit order price.

This statement no longer is applicable

and is superseded by this new policy

interpretation as of the date of the

publication of Notice To Members 97–

57.

The NASD and Nasdaq believe that

the new interpretation increases

investor protection by clarifying a

member’s obligations to customer limit

orders. Accordingly, the NASD and

Nasdaq believe that the proposed rule

change is consistent with the provisions

of Section 15A(b)(6) of the Act 3 in that

it protects investors and the public

interest, and is designed to promote just

and equitable principles of trade.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD and Nasdaq do 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, as amended.

(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

The foregoing rule change will

become effective when the new

interpretation appears in NASD Notice

To Members 97–57, as it constitutes a

stated policy and interpretation with

respect to the meaning of an existing

rule under Section 19(b)(3)(A)(i) of the

Act and Rule 19b–4(e)(1) thereunder.

At any time within 60 days of the

filing of a rule change pursuant to

Section 19(b)(3)(A) of the Act, the

Commission may summarily abrogate

the 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. 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 the filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to file number

SR–NASD–97–66 and should be

submitted by October 8, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24589 Filed 9–16–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39048; File No. SR–PTC–

97–03]

Self-Regulatory Organizations;

Participants Trust Company; Order

Approving a Proposed Rule Change

Relating to a Change in the Cut-off

Time for Intraday Return of Prefunding

Payments

September 10, 1997.

On May 1, 1997, the Participants

Trust Company (‘‘PTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) a proposed rule change

(File No. SR–PTC–97–03) pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’).1 Notice

of the proposal was published in the

Federal Register on June 27, 1997.2 No

comment letters were received. For the

reasons discussed below, the

Commission is approving the proposed

rule change.

I. Description

The proposed rule change amends

PTC’s rules to extend from 11:00 a.m. to

1:00 p.m. the cut-off time for a

participant to request that PTC return to

them their prefunding payments made

to PTC earlier that day. Under the rule

change, only prefunding payments

which are no longer needed to support

transaction processing are eligible for

intraday return.

PTC originally amended its rules in

August 1996, to permit the intraday

return of prefunding payments.3 Before

the rule change, PTC’s rules required

that prefunding payments be applied to

end-of-day settlement or be made

available for withdrawal on the next

business day or thereafter.

On September 9, 1996, PTC

implemented intraday return of

prefunding payments as a pilot program

(‘‘Program’’). The procedures

established for the Program included,

among other things,4 that only

prefunding payments received by PTC

between 8:30 a.m. and 11:00 a.m. were

eligible for return. PTC expected to

make all returns between 11:00 a.m. and

12:00 p.m. These initial procedures

were incorporated in PTC’s Participant

Operating Guide.

When the Commission approved the

Program, the Commission’s order noted,

‘‘Upon implementation of the Program,

PTC plans to evaluate the initial

procedures on a quarterly basis and will

make changes based on such procedures

as necessary based upon PTC’s

experience with the Program. PTC will

be required to file with the Commission

a proposed rule change prior to any

change or modification of the initial

procedures.’’ 5

In developing the Program, PTC

expected that its participants would be

able to determine their excess

prefunding amounts by 11:00 a.m. in

order to request a return by that time.

After the Program’s implementation,

PTC monitored prefunding payments