48688 Federal Register / Vol. 62, No. 179 / Tuesday, September 16, 1997 / Notices

13See 1987 Report at 4–48.

14See Market Analysis of October 13 and 16, 1989

(‘‘1989 Analysis’’) at 3–4 and 33–44.

15See 1987 Report at 4–8 and 1989 Report at 23–

26.

16A specialist’s dealer responsibilities consist of

‘‘affirmative’’ and ‘‘negative’’ obligations. In

accordance with their affirmative obligations,

specialists are obligated to trade for their own

accounts to minimize order disparities and

contribute to continuity and depth in the market.

Conversely, pursuant to their negative obligations,

specialists are precluded from trading for their own

accounts unless such dealing is necessary for the

maintenance of a fair and orderly market. In view

of these obligations, the price trend in a security

should be determined not by specialist trading but

by the movements of the incoming orders that

initiate these trades.

17The Commission notes that Rule 170.01

currently only requires floor official approval for

purchases or sales at a price equal to the last sale

price when all or substantially all the stock offered/

bid on the limit order book represents all or

substantially all the stock offered/bid in the market.

Moreover, the rule currently does not require floor

official approval of such transactions if they are

effected in ‘‘less active markets’’ where they are an

essential part of a proper course of dealings and

where the amount of stock involved and the price

change, if any, are normal in relation to the market.

18 In addition, Amex Rule 170.01 clearly requires

that covered transactions must be reasonably

necessary to render the specialist’s position

adequate to such needs.

19Section 19(g) of the Act requires every selfregulatory organization to comply with, and enforce

compliance with, the Act, the rules thereunder and

its own rules.

20 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)91) (1994).

positions.13 Although many Amex

specialists appeared to perform well

under the adverse conditions, specialist

performance during this period varied

widely.

The Division also examined Amex

specialist performance during the

volatile conditions of October 13 and

16, 1989. The Division found that

specialist performance during that time

was similar in many respects to

specialist performance during the 1987

market break.14 Specifically, the

Division found that, during these two

periods of extreme market volatility,

specialists were confronted with

extraordinary order imbalances that

required unprecedented capital

commitments.15 As in October 1987,

specialists as a whole on October 13,

1989 were substantial buyers in the face

of heavy selling pressure, although

performance varied among specialists.

Both the 1987 Report and the 1989

Analysis reaffirmed the importance of

specialist participation in countering

market trends during periods of market

volatility. At the same time, the reports

emphasized the importance the

Commission placed on the Amex’s

ability to ensure that all specialists

comply with their affirmative and

negative market making obligations

during such periods.16

The Commission recognizes that

market conditions may exist at times

where it is necessary or desirable to

provide specialists with additional

flexibility in establishing or increasing a

position in order to facilitate their

ability to maintain fair and orderly

markets, particularly during unusual

market conditions. Accordingly, the

Commission believes that it is

appropriate for the Amex to remove

those provisions of Rule 170.01 that

require floor official approval for certain

specialist purchases on zero-minus ticks

and specialist sales on zero-plus ticks.17

The proposed changes may allow

specialists, during periods of market

volatility, to keep any general price

movements orderly, thereby furthering

the maintenance of fair and orderly

markets consistent with Sections 6 and

11 of the Act. The Commission

emphasizes, however, that the expanded

flexibility afforded to specialists by the

proposal merely obviates the current

required floor official approval for the

affected transactions and does not

reflect that all specialist purchases on

zero-minus ticks and sales on zero-plus

ticks are appropriate. Notably,

specialists remain subject to their

‘‘negative obligations,’’ specifically, the

requirement that specialists are

precluded from trading for their own

account unless such dealing is

necessary for the maintenance of a fair

and orderly market.18

Finally, the Commission believes that

the Amex’s established surveillance

procedures and criteria, including the

automated computer program which

identifies each instance in which a

specialist crosses the market, should

allow the Exchange to monitor specialist

compliance with Amex Rule 170.01. In

addition, the Commission expects the

Amex to monitor carefully compliance

with the procedures of Amex Rule 170

as required under Section 19(g) of the

Act.19

For the foregoing reasons, the

Commission finds that the Amex’s

proposal to permit specialists to engage

in certain types of transactions by

removing existing restrictions that

currently limit specialists when

establishing or increasing a position in

their specialty stocks is consistent with

the requirements of the Act and the

rules and regulations thereunder.

It is therefore ordered, pursuant to

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

proposed rule change (SR–Amex–97–

10), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.20

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24544 Filed 9–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39033; File No. SR–NASD–

97–62]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

National Association of Securities

Dealers, Inc. Relating to Gross Income

Assessments to Member Firms

September 9, 1997.

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

Securities Exchange Act of 1934

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

August 22, 1997, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) 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 NASD. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organizations’

Statement of the Terms of Substance of

the Proposed Rule Change

The NASD is proposing a rule change

to amend Section 1(c) to Schedule A of

the NASD By-Laws (‘‘Schedule A’’) to

revise the credit allowed to members

against the annual assessment on their

gross income. The text of the proposed

rule change is below. Additions are

italicized; deletions are bracketed.

* * * * *

Schedule A to the NASD By-Laws

Assessments and fees pursuant to the

provisions of Article VI of the By-Laws

of the Corporation, shall be determined

on the following basis.

Section 1—Assessments

Each member shall pay an annual

assessment composed of:

(a) No Change.

(b) No Change.

(c) Members shall receive a credit

against the annual assessment on gross

income stated in paragraph (a) above as

follows:

(1) Portion of assessment > $5,000 —

21% [23%]

(2) Portion of assessment > $25,000 —

3% [4%] additional
Federal Register / Vol. 62, No. 179 / Tuesday, September 16, 1997 / Notices 48689

2Schedule A, Section 1(a) requires NASD

members to pay an amount equal to the greater of

$1,200.00 or the total of: (i) 0.125% of the annual

gross revenue from state and municipal securities

transactions; (ii) 0.125% of annual gross revenue

from other over-the-counter securities transactions;

(iii) 0.125% of the annual gross revenue from U.S.

Government securities transactions, and; (iv) with

respect to members whose books, records, and

financial operations are examined by the NASD,

0.125% of annual gross revenue from securities

transactions executed on an exchange.

3 15 U.S.C. 78o–3(b)(5) (1994).

4 15 U.S.C. 78s(b)(3)(A)(ii) (1994).

5 17 CFR 240.19b–4 (1997).

6 17 CFR 200.30–3(a)(12) (1997).

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

2 17 CFR 240.19b–4.

(3) Portion of assessment > $50,000 —

5% additional

(4) Portion of assessment > $100,000 —

3% [4%] additional.

* * * * *

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 Regulation,

Inc. (‘‘NASD Regulation’’) 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

Pursuant to Article VI of the NASD

By-Laws, the NASD requires its

members to pay an annual assessment

fee, as defined by Schedule A, Section

1. NASD members are required under

Section 1(a) of Schedule A to pay an

amount equal to the greater of $1,200.00

or the total of a specified percentage of

their annual gross income from

securities transactions.2 NASD members

also receive, pursuant to Section 1(c) of

Schedule A, a credit against the annual

assessment on their gross income

imposed under Section 1(a) of Schedule.

A. The Section 1(c) of Schedule A

credit to members is calculated by a

tiered discount structure that is

intended to address, to some extent, the

regulatory subsidy provided by larger

NASD firms.

The proposed rule change would

amend Section 1(c) of Schedule A to

decrease the credit allowed to members

against the annual assessment on their

gross income by an average of

approximately 10%. This reduction in

credit allowed to members will result in

approximately $2.8 million of

additional revenue in 1997 for the

NASD. This action, based on the current

forecast for operating costs and other

revenues, should allow the NASD to

fund its operating needs and achieve a

balanced budget for 1997. The need for

this discount rate change results from

various factors, including a shortfall in

the members’ 1996 reported gross

revenues subject to this assessment, as

well as incremental costs associated

with various computer and technology

related initiatives and various personnel

programs.

2. Statutory Basis

The NASD believes that the proposed

rule change is consistent with the

provisions of Section 15A(b)(5) of the

Act,3 which require that the rules of the

Association provide for the equitable

allocation of reasonable dues, fees, and

other charges in that the proposed rule

reasonably provides for an equitable

reduction in the tiered discount

structure applied to the gross revenue

assessment.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD 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

The foregoing rule change establishes

or changes a due, fee, or other charge

and, therefore, has become effective on

August 22, 1997, pursuant to Section

19(b)(3)(A)(ii) of the Act 4 and

subparagraph (e) of Rule 19b–4 5

thereunder. At any time within 60 days

of the filing of such rule change, 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 such 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–97–62 and should be

submitted by October 7, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24444 Filed 9–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39043; File No. SR–NASD–

97–10]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 1 to the Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to the

Distribution of Information Concerning

the Availability of the NASD’s Public

Disclosure Program

September 10, 1997.

I. Introduction

On February 11, 1997, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) submitted

to the Securities and Exchange

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

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

Securities Exchange Act of 1934

(‘‘Act’’),1 and Rule 19b–4 thereunder,2 a

proposal to adopt NASD Rule 2280,

‘‘Investor Education and Protection,’’

which will require certain NASD

members to provide customers with the

following items of information in