1010 Federal Register / Vol. 62, No. 4 / Tuesday, January 7, 1997 / Notices

1The classification criteria are set forth in NASD

Rule 4613(a)(2) and the footnote to NASD Rule

4710(g). 2 17 CFR 200.30–3(a)(12).

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the rule change is to

effectuate Nasdaq’s periodic

reclassification of NNM securities into

appropriate tier sizes for purposes of

determining the maximum size order for

a particular security eligible for

execution through SOES and the

minimum quote size requirements for

Nasdaq market in NNM securities.

Nasdaq periodically reviews the SOES

tier size applicable to each NNM

security to determine if the trading

characteristics of the issue have changed

so as to warrant a tier size adjustment.

Such a review was conducted using data

as of September 30, 1996, pursuant to

the following established criteria: 1

NNM securities with an average daily nonblock volume of 3,000 shares or more a day,

a bid price less than or equal to $100, and

three or more market makers are subject to

a minimum quotation size requirement of

1,000 shares and a maximum SOES order

size of 1,000 shares;

NNM securities with an average daily nonblock volume of 1,000 shares or more a day,

a bid price less than or equal to $150, and

two or more market makers are subject to a

minimum quotation size requirement of 500

shares and a maximum SOES order size of

500 shares; and

NNM securities with an average daily nonblock volume of less than 1,000 shares a day,

a bid price less than or equal to $250, and

less than two market makers are subject to a

minimum quotation size requirement of 200

shares and a maximum SOES order size of

200 shares.

Pursuant to the application of this

classification criteria, 762 NNM

securities will be reclassified effective

January 2, 1997. These 762 NNM

securities are set out in the NASD’s

Notice To Members 96–88 (December,

1996).

In ranking NNM securities pursuant

to the established classification criteria,

Nasdaq followed the changes dictated

by the criteria with three exceptions.

First an issue was not moved more than

one tier size level. For example, if an

issue was previously categorized in the

1,000-share tier size, it would not be

permitted to move to the 200-share tier

even if the reclassification criteria

showed that such a move was

warranted. In adopting this policy,

Nasdaq was attempting to maintain

adequate public investor access to the

market for issues in which the tier size

level decreased and help ensure the

ongoing participation of market makers

in SOES for issues in which the tier size

level increased. Second, for securities

priced below $1 where the reranking

called for a reduction in tier size, the

tier size was not reduced. Third, for the

top 50 Nasdaq securities based on

market capitalization, the SOES tier

sizes were not reduced regardless of

whether the reranking called for a tiersize reduction.

The NASD believes that the proposed

rule change is consistent with Section

15A(b)(6) of the Act. Section 15A(b)(6)

requires, among other things, that the

rules of the NASD governing the

operation of The Nasdaq Stock Market

be designed to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities,

and to remove impediments to and

perfect the mechanism of a free and

open market. The NASD believes that

the reassignment of NNM securities

within SOES tier size levels and

minimum quotation size levels will

further these ends by providing an

efficient mechanism for small, retail

investors to execute their orders on

Nasdaq and by providing investors with

the assurance that they can effect trades

up to a certain size at the best prices

quoted on Nasdaq.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD believes that the proposed

rule change will not 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

Comments were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change has become

effective immediately pursuant to

Section 19(b)(3)(A)(i) of the Act and

subparagraph (e) of Securities Exchange

Act Rule 19b–4 because the reranking of

NNM securities into appropriate SOES

tier sizes was done pursuant to the

NASD’s stated policy and practice with

respect to the administration and

enforcement of two existing NASD

rules. Further, in the SOES Tier Size

Order, the Commission requested that

the NASD provide this information as

an interpretation of an existing NASD

rule under Section 19(b)(3)(A) 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, NW.,

Washington, DC 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 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–96–45 and should be

submitted by January 28, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.2

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–236 Filed 1–6–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38101; File No. SR–NASD–

96–58]

Self-Regulatory Organizations; Notice

and Order Granting Accelerated

Approval of Proposed Rule Change by

the National Association of Securities

Dealers, Inc., Relating to an Interim

Extension of the OTC Bulletin Board 

Service through March 31, 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 December 27, 1996,

the National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘Association’’)

filed with the Securities and Exchange

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

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the NASD. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons and is

simultaneously approving the proposal.
Federal Register / Vol. 62, No. 4 / Tuesday, January 7, 1997 / Notices 1011

1Securities Exchange Act Release No. 27975 (May

1, 1990), 55 19124.

2With the Commission’s approval of File No. SR–

NASD–93–24, the universe of securities eligible for

quotation in the OTCBB now includes certain

equities listed on regional stock exchanges that do

not quality for dissemination of transaction reports

via the facilities of the Consolidated Tape

Association.

3Securities Exchange Act Release No. 37387

(June 28, 1996), 61 FR 36098.

4Securities Exchange Act Release No. 30766

(June 1, 1992), 57 FR 24281. See also Securities

Exchange Act Release No. 34956 (November 9,

1994), 59 FR 59808 providing notice of Amendment

No. 1 to the proposed rule change.

5On November 24, 1992, the NASD filed an

application with the Commission for interim

designation of the Service as an automated

quotation system for penny stocks, pursuant to

Section 17B(b) of the Act. On December 30, 1992,

the Commission granted Qualifying Electronic

Quotation System (‘‘QEQS’’) status for the Service

for purposes of certain penny stock rules that

became effective on January 1, 1993. On August 26,

1993, the Commission granted the NASD’s request

for an extension of QEQS status until such time as

the OTCBB meets the statutory requirements of

Section 17B(b)(2).

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

On June 1, 1990, the NASD, through

a subsidiary corporation, initiated

operation of the OTC Bulletin Board

Service (‘‘OTCBB Service’’ or ‘‘Service’’)

in accord with the Commission’s

approval of File No. SR–NASD–88–19,

as amended.1 The OTCBB Service

provides a real-time quotation medium

that NASD member firms can elect to

use to enter, update, and retrieve

quotation information (including

unpriced indications of interest) for

securities traded over-the-counter that

are neither listed on The Nasdaq Stock

MarketSM nor on a registered national

securities exchange (collectively

referred to as ‘‘OTC Equities’’).2

Essentially, the Service supports

NASD members’ market making in OTC

Equities through authorized Nasdaq

Workstation IITM authorized devices.

Real-time access to quotation

information captured in the Service is

available to subscribers of Level 2/3

Nasdaq service as well as subscribers of

vendor-sponsored services that now

carry OTCBB Service data. The Service

is currently operating under an interim

approval that expires on December 31,

1996.3

The NASD hereby files this proposed

rule change, pursuant to Section

19(b)(1) of the Act and Rule 19b–4

thereunder, to obtain authorization for

an interim extension of the Service

through March 31, 1997. During this

interval, there will be no material

change in the OTCBB Service’s

operational features, absent Commission

approval of a corresponding Rule 19b–

4 filing.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

NASD 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. The NASD 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 purpose of this filing is to ensure

continuity in the operation of the

OTCBB Service while the Commission

considers an earlier NASD rule filing

(File No. SR–NASD–92–7) that

requested permanent approval of the

Service.4 For the month ending

November, 1996, the Service reflected

the market making positions of 411

NASD member firms displaying

quotations/indications of interest in

approximately 5,700 OTC Equities.

During the proposed extension,

unregistered foreign securities and

American Depositary Receipts

(collectively, ‘‘Foreign Equity

Securities’’) will remain subject to the

twice-daily, update limitation that

traces back to the Commission’s original

approval of the OTCBB Service’s

operation. As a result, all priced bids/

offers displayed in the Service for

unregistered Foreign Equity Securities

will remain indicative.

In conjunction with the launch of the

Service in 1990, the NASD implemented

a filing requirement (currently under

NASD Rule 6740) and review

procedures to verify member firms’

compliance with Rule 15c2–11 under

the Act. During the proposed extension,

this review process will continue to be

an important component of the NASD’s

self-regulatory oversight of brokerdealers’ market making in OTC Equities.

The NASD also expects to work closely

with the Commission staff in developing

further enhancements to the Service,

including those related to the market

structure requirements mandated by the

Securities Enforcement Remedies and

Penny Stock Reform Act of 1990

(‘‘Reform Act’’) particularly Section 17B

of the Act.5 The NASD notes that

implementation of the Reform Act

entails Commission rulemaking in

several areas, including the

development of mechanisms for

gathering and disseminating reliable

quotation/transaction information for

‘‘penny stocks.’’

2. Statutory Basis

The NASD believes that this proposed

rule change is consistent with Sections

11A(a)(1), 15A(b)(6) and (11), and

Section 17B of the Act. Section

11A(a)(1) sets forth the Congressional

findings and policy goals respecting

operational enhancements to the

securities markets. Basically, the

Congress found that new data

processing and communications

techniques should be applied to

improve the efficiency of market

operations, broaden the distribution of

market information, and foster

competition among market participants.

Section 15A(b)(6) requires, among other

things, that the NASD’s rules promote

just and equitable principles of trade,

facilitate securities transactions, and

protect public investors. Subsection (11)

thereunder authorizes the NASD to

adopt rules governing the form and

content of quotations for securities

traded over-the-counter for the purposes

of producing fair and informative

quotations, preventing misleading

quotations, and promoting orderly

procedures for collecting and

disseminating quotations. Finally,

Section 17B contains Congressional

findings and directives respecting the

collection and distribution of quotation

information on low-priced equity

securities that are neither Nasdaq nor

exchange-listed.

The NASD believes that extension of

the Service through March 31, 1997 is

fully consistent with the foregoing

provisions of the Act.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD believes that the rule

change will not 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

The NASD requests that the

Commission find good cause, pursuant

to Section 19(b)(2) of the Act, for
1012 Federal Register / Vol. 62, No. 4 / Tuesday, January 7, 1997 / Notices

6 17 CFR 200.30–3(a)(12).

1Securities Exchange Act Release No. 36465

(November 8, 1995), 60 FR 57473 (November 15,

1995).

approving the proposed rule change

prior to the 30th day after its

publication in the Federal Register to

avoid any interruption of the Service.

The current authorization for the

Service extends through December 31,

1996. Hence, it is imperative that the

Commission approve the instant filing

on or before that date. Otherwise, the

NASD will be required to suspend

operation of the Service pending

Commission action on the proposed

extension.

The NASD believes that accelerated

approval is appropriate to ensure

continuity in the Service’s operation

pending a determination on permanent

status for the Service, as requested in

File No. SR–NASD–92–7. Continued

operation of the Service will ensure the

availability of an electronic quotation

medium to support member firms’

market-making in approximately 5,700

OTC Equities and the widespread

dissemination of quotation information

on these securities. The Service’s

operation also expedites price discovery

and facilitates the execution of customer

orders at the best available price. From

a regulatory standpoint, the NASD’s

capture of quotation data from

participating market makers

supplements the transactional data now

reported by member firms pursuant to

NASD Rule 6600.

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 No.

SR–NASD–58 and should be submitted

by January 28, 1997.

V. Commission’s Findings and Order

Granting Accelerated Approval

The Commission finds that approval

of the proposed rule change is

consistent with the Act and the rules

and regulations thereunder, and in

particular with the requirements of

Section 15A(b)(11) of the Act, which

provides that the rule of the NASD

relating to quotations must be designed

to produce fair and informative

quotations, prevent fictitious or

misleading quotations and promote

orderly procedures for collecting,

distributing, and publishing quotations.

The Commission finds good cause for

approving the proposed rule change

prior to the 30th day after the date of

publishing notice. The Commission

finds that approval of this proposed rule

change to continue operation of the

pilot program is appropriate. The

Commission has solicited and continues

to solicit comments from the OTCBB

Service. An extension of the pilot

program will provide the Commission

with sufficient time to consider the

issues raised by the various interested

parties.

Accelerated approval of the NASD’s

proposal is appropriate to ensure

continuity in the Service’s operation as

an electronic quotation medium that

supports NASD members’ market

making in OTC Equities and that

facilitates price discovery and the

execution of customers’ orders at the

best available price. Additionally,

continued operation of the Service will

materially assist the NASD’s

surveillance of trading in OTC Equities

that are quoted in the Service, including

certain non-Tape B securities that are

listed on regional exchanges and quoted

in the Service.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act, that the

proposed rule change be, and hereby is,

approved for an interim period through

March 31, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–238 Filed 1–6–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38095; File No. SR–NYSE–

96–39]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the New

York Stock Exchange, Inc., Relating to

Extending the Current $400,000 Limit

on Transaction Charges through 1997

December 30, 1996.

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 December 18, 1996,

the New York Stock Exchange, Inc.

(‘‘Exchange’’) 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 the self-regulatory organization. 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

In January 1996, the NYSE

implemented a rate revision to its equity

transaction charges. The revision

included the elimination of all systems

credits, a reduction of charges for shares

5,000 and under, the elimination of

charges for non-market-maker system

orders from 100 to 2,099 shares, the

elimination of the growth limitation of

4% over 1988 levels, and the

implementation of a monthly $400,000

transaction charge cap per firm, a

limitation which would be indexed

annually to average daily volume, and

would be removed January 1, 1999.1

The proposed revision for the 1997

transaction charge extends the current

$400,000 cap rather than raising the cap

based on the increase in volume from

1995 to 1996.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization 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.

The self-regulatory organization has

prepared summaries, set forth in

sections (A), (B), and (C) below, of the