Federal Register / Vol. 62, No. 4 / Tuesday, January 7, 1997 / Notices 1009

10See Securities Exchange Act Release No. 36027,

supra note 6.

11Telephone conversation between David T.

Rusoff, Esq. Foley & Lardner, and Janet RussellHunter, Special Counsel, Office of Market

Supervision, Division of Market Regulation, SEC,

on December 23, 1996.

12 15 U.S.C. 78s(b)(2).

13 17 CFR 200.20–3(a)(12).

a month, and may be no less than 30

seconds.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange, and, in particular, with

Section 6(b)(5) of the Act, in that the

proposal is designed to promote just and

equitable principles of trade, to remove

impediments to and to perfect the

mechanism of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest. Specifically, the

Commission continues to believe that

the pricing and execution procedures of

Enhanced SuperMAX and Timed

Enhanced SuperMAX are consistent

with the maintenance of fair and orderly

auction markets on national securities

exchanges.The Commission asked the

Exchange to monitor the operation of

the systems and determine their

effectiveness and to submit a report to

the Commission describing its

experience with the pilot program.10

While the Exchange submitted a report

on August 30, 1996, the Commission

has requested and the Exchange has

agreed to submit, by January 31, 1997,

certain supplemental data regarding the

pilot program.

The Commission believes that this

additional data and conclusions reached

therefrom will be critical in determining

whether to further extend or

permanently approve the program.

Moreover, extending the effectiveness of

the pilot program until March 1, 1997

will give the Commission an

opportunity to carefully and

comprehensively evaluate the

information provided by the Exchange.

Accordingly, the Commission believes it

is reasonable to extend the Enhanced

SuperMAX and Timed Enhanced

SuperMAX pilot program until March 1,

1997, and to request that the Exchange

submit additional data to the

Commission by January 31, 1997.

Any requests to modify this pilot

program, extend its effectiveness, or to

seek permanent approval for the pilot

program should be submitted to the

Commission by January 31, 1997 as a

proposed rule change pursuant to

Section 19(b) of the Act.

The Commission finds good cause for

approving Amendment No. 2 to the

proposed rule change prior to the

thirtieth day after the date of

publication of notice thereof in the

Federal Register. Amendment No. 2

requests that rather than being approved

on a permanent basis, that the Enhanced

SuperMAX and Timed Enhanced

SuperMAX features of the SuperMAX

system be approved through March 1,

1997, which will permit the pilot

program to remain in effect without

interruption. In addition, the Exchange

has represented that no problems have

arisen and no complaints have been

received concerning the pilot program

since its implementation.11

Accordingly, the Commission believes

there is good cause, consistent with

Sections 6(b)(5) and 19(b)(2) of the Act,

to approve Amendment No. 2 on an

accelerated basis.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning Amendment No.

2. 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 at

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the Exchange. All submission

should refer to File No. SR–CHX–96–26

and should be submitted by January 28,

1997.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,12 that the

proposed rule change (SR–CHX–96–26),

as amended, is approved, and

accordingly, that the pilot program is

extended until March 1, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–237 Filed 1–6–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38097; File No. SR–NASD–

96–45]

Self-Regulatory Organizations; Notice

and Immediate Effectiveness of

Proposed Rule Change by National

Association of Securities Dealers, Inc.,

Relating to Small Order Execution

System Tier Size Classifications

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 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.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The NASD is submitting this filing to

effectuate The Nasdaq Stock Market,

Inc.’s (‘‘Nasdaq’’) periodic

reclassification of Nasdaq Market

(‘‘NNM’’) securities into appropriate tier

sizes for purposes of determining the

maximum size order for a particular

security eligible for execution through

Nasdaq’s Small Order Execution System

(‘‘SOES’’) and the minimum quote size

requirements for Nasdaq market makers

in NNM securities. Specifically, under

the proposal, 762 NNM securities will

be reclassified into a different SOES tier

size effective January 2, 1997. Since the

NASD’s proposal is an interpretation of

existing NASD rules, there are no

language changes.

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.
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.