[Federal Register Volume 62, Number 199 (Wednesday, October 15, 1997)]
[Notices]
[Pages 53675-53679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27281]



[[Page 53675]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39218; File No. SR-NASD-97-04]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the National Association of 
Securities Dealers, Inc. Relating to Its Rules Governing Excused Market 
Maker Withdrawals and Market Maker Reinstatements

October 8, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act''),\1\ notice is hereby given that on 
January 24, 1997, 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. On September 30, 1997, the NASD submitted an amendment 
(``Amendment No. 1'') to the proposed rule change to make technical 
amendments to the text of the proposed rule change.\2\ The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ See Letter from Robert E. Aber, Vice President and General 
Counsel, NASDAQ, to Katherine England, Assistant Director, Division 
of Market Regulation, Securities and Exchange Commission (September 
29, 1997).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD proposes to amend its rules governing excused market maker 
withdrawals and the voluntary termination of market maker 
registrations. The proposed rule changes also would amend the NASD's 
rules governing the reinstatement of market makers that have been 
``SOESed out of the Box'' or have accidentally withdrawn from a 
security. The text of the proposed rule changes are as follows. 
(Additions are italicized; deletions are bracketed.)
* * * * *

4619. Withdrawal of Quotations and Passive Market Making

    (a) A market maker that wishes to withdraw quotations in a security 
or have its quotations identified as the quotations of a passive market 
maker shall contact Nasdaq Market Operations to obtain excused 
withdrawal status prior to withdrawing its quotations or identification 
as a passive market maker. Withdrawals of quotations or identifications 
of quotations as those of a passive market maker shall be granted by 
Nasdaq Market Operations only upon satisfying one of the conditions 
specified in this Rule.
    (b) Excused withdrawal status based on [physical] circumstances 
beyond the market maker's control may be granted for up to five (5) 
business days, unless extended by Nasdaq Market Operations. Excused 
withdrawal status [or passive market maker status] based on 
demonstrated legal or regulatory requirements, supported by appropriate 
documentation and accompanied by a representation that the condition 
necessitating the withdrawal of quotations is not permanent in nature, 
may, upon written request, be granted for not more than sixty (60) days 
(unless such request is required to be made pursuant to paragraph (d) 
below). Excused withdrawal status based on religious holidays may be 
granted only if written notice is received by the Association [five] 
one business day[s] in advance and is approved by the Association. 
Excused withdrawal status based on vacation may be granted only if:
    (1) the written request for withdrawal is received by the 
Association [twenty (20)] one business day[s] in advance, and is 
approved by the Association;
    (2) the request includes a list of the securities for which 
withdrawal is requested; and
    (3) the request is made by a market maker with three (3) or fewer 
Nasdaq level 3 terminals. Excused withdrawal status may be granted to a 
market maker that has withdrawn from an issue prior to the public 
announcement of a merger or acquisition and wishes to re-register in 
the issue pursuant to the same-day registration procedures contained in 
Rule 4611, above, provided the market maker has remained registered in 
one of the affected issues. The withdrawal of quotations because of 
pending news, a sudden influx of orders or price changes, or to effect 
transactions with competitors shall not constitute acceptable reasons 
for granting excused withdrawal status.
    (c)-(d) No changes.
    (e) The Market Operations Review Committee shall have jurisdiction 
over proceedings brought by Market Makers seeking review of the denial 
of an excused withdrawal pursuant to this Rule 4619, or the conditions 
imposed on their reentry.

4620. Voluntary Termination of Registration

    (a) A market maker may voluntarily terminate its registration in a 
security by withdrawing its quotations from The Nasdaq Stock Market. A 
market maker that voluntarily terminates its registration in a security 
may not re-register as a market maker in that security for twenty (20) 
business days. Withdrawal from SOES participation as a market maker in 
a Nasdaq National Market security shall constitute termination of 
registration as a market maker in that security for purposes of this 
Rule; provided, however, that a market maker that fails to maintain a 
clearing arrangement with a registered clearing agency or with a member 
of such an agency and is withdrawn from participation in the Automated 
Confirmation Transaction System and thereby terminates its registration 
as a market maker in Nasdaq National Market issues may register as a 
market maker at any time after a clearing arrangement has been 
reestablished and the market maker has complied with ACT participant 
requirements contained in Rule 6100.
    (b) Notwithstanding the above, a market maker that accidentally 
withdraws as a market maker may be reinstated if;
    (1) the market maker notified Market Operations of the accidental 
withdrawal as soon as practicable under the circumstances, but within 
at least one hour of such withdrawal, and immediately thereafter 
provided written notification of the withdrawal and reinstatement 
request;
    (2) it is clear that the withdrawal was inadvertent and the market 
maker was not attempting to avoid its market making obligations; and
    (3) the market maker's firm would not exceed the following 
reinstatement limitations:
    (A) for firms that simultaneously made markets in less than 250 
stocks during the previous calendar year, the firm can receive no more 
than two (2) reinstatements per year;
    (B) for firms that simultaneously made markets in more than 250 but 
less than 500 stocks during the previous calendar year, the firm can 
receive no more than three (3) reinstatements per year; and
    (C) for firms that simultaneously made markets in more than 500 
stocks during the previous calendar year, the firm can receive no more 
than six (6) reinstatements per year.
    (c) Factors that the Association will consider in granting a 
reinstatement under paragraph (b) of this rule include, but are not be 
limited to:
    (1) the number of accidental withdrawals by the market maker in the 
past, as compared with market makers

[[Page 53676]]

making markets in a comparable number of stocks;
    (2) the similarity between the symbol of the stock that the market 
maker intended to withdraw from and the symbol of the stock that the 
market maker actually withdrew from;
    (3) (market conditions at the time of the withdrawal;
    (4) whether, given the market conditions at the time of the 
withdrawal, the withdrawal served to reduce the exposure of the 
member's position in the security at the time of the withdrawal to 
market risk; and
    (5) the timeliness with which the market maker notified Market 
Operations of the error.
    (d) The Market Operations Review Committee shall have jurisdiction 
over proceedings brought by Market Makers seeking review of their 
denial of a reinstatement pursuant to paragraph (b) above.
* * * * *

4730. Participant Obligations in SOES

* * * * *
    (b)(6) In the case of an NNM security, a Market Maker will be 
suspended from SOES if its bid or offer has been decremented to zero 
due to SOES executions and will be permitted a standard grace period, 
the duration of which will be established and published by the 
Association, within which to take action to restore a two-sided 
quotation in the security for at least one normal unit of trading. A 
Market Maker that fails to re-enter a two-sided quotation in a NNM 
security within the allotted time will be deemed to have withdrawn as a 
Market Maker (``SOESed out of the Box''). except as provided below in 
this subparagraph and in subparagraph (7) [below], a Market Maker that 
withdraws in an NNM security may not reenter SOES as a Market Maker in 
that security for twenty (20) business days.
    (A) Notwithstanding the above, a market maker can be reinstated if:
    (i) the market maker makes a request for reinstatement to Market 
Operations as soon as practicable under the circumstances, but within 
at least one hour of having been SOESed out of the Box, and immediately 
thereafter provides written notification of the reinstatement request;
    (ii) it was a Primary Market Maker at the time it was SOESed out of 
the Box;
    (iii) the market maker's firm would not exceed the following 
reinstatement limitations;
    a. for firms that simultaneously made markets in less than 250 
stocks during the previous calendar year, the firm can receive no more 
than four (4) reinstatements per year;
    b. for firms that simultaneously made markets in more than 250 but 
less than 500 stocks during the previous calendar year, the firm can 
receive no more than six (6) reinstatements per year;
    c. for firms that simultaneously made markets in more than 500 
stocks during the previous calendar year, the firm can receive no more 
than twelve (12) reinstatements per year; and
    (iv) the designated Nasdaq officer makes a determination that the 
withdrawal was not an attempt by the market maker to avoid its 
obligation to make a continuous two-sided market. In making this 
determination, the designated Nasdaq officer will consider, among other 
things:
    a. whether the market conditions in the issue included unusual 
volatility or other unusual activity, and/or the market conditions in 
other issues in which the market maker made a market at the time of the 
SOES exposure limit exhaustion;
    b. the frequency with which the firm has been SOESed out of the Box 
in the past;
    c. Procedures the firm has adopted to avoid being inadvertently 
SOESed out of the Box; and
    d. the length of time before the market maker sought reinstatement.
    (B) If a market maker has exhausted the reinstatement limitations 
in subparagraph (b)(6)(A)(iii) above, the designated Nasdaq officer may 
grant a reinstatement request if he or she finds that such 
reinstatement is necessary for the protection of investors or the 
maintenance of fair and orderly markets and determines that the 
withdrawal was not an attempt by the market maker to avoid its 
obligation to make a continuous two-sided market in instances where:
    (i) a member firm experiences a documented problem or failure 
impacting the operation or utilization of any automated system operated 
by or on behalf of the firm (chronic system failures within the control 
of the member will not constitute a problem or failure impacting a 
firm's automated system) or involving an automated system operated by 
Nasdaq;
    (ii) the market maker is a manager or co-manager of a secondary 
offering from the time the secondary offering is announced until ten 
days after the offering is complete; or
    (iii) absent the reinstatement, the number of market makers in a 
particular issue is equal to two (2) or less or has otherwise declined 
by 50% or more from the number that existed at the end of the prior 
calendar quarter, except that if a market maker has a regular pattern 
of being frequently SOESed out of the Box, it may not be reinstated 
notwithstanding the number of market makers in the issue.
* * * * *
    (b)(8) [The Rule 9700 Series of the Code of Procedure] The Market 
Operations Review Committee shall [apply to] have jurisdiction over 
proceedings brought by Market Makers seeking review of [(A)] their 
removal from SOES pursuant to subparagraphs (6) or (7) above [, (B) the 
denial of an excused withdrawal pursuant to Rule 4619, or (C) the 
conditions imposed on their reentry].
* * * * *

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

    In order to ensure that markt makers are complying with their 
obligation to make continuous, firm two-sided markets, NASD Rule 4620 
provides that market makers who voluntarily withdraw from an issue 
cannot re-register in that issue for 20 business days. This rule is 
commonly referred to as the ``20-day Rule.'' A corollary rule to the 
``20-day Rule'' is NASD Rule 4730(b)(6), a Small Order Execution System 
(``SOES'') rule that provides that a market maker in a Nasdaq National 
Market (``NNM'') security will be deemed to have voluntarily withdrawn 
from a stock, and therefore be subject to the 20-Day Rule, if it has 
failed to restore a two-sided quotation within five minutes after its 
bid or offer has been completely decremented due to a SOES execution. 
When a market maker is deregistered from a stock because it failed to 
restore its quotation, it is referred to as being ``SOESed out of the 
Box.'' To avoid being ``SOESed out of the Box,'' members can do one of 
two things: (a) Elect to not have their quote size decremented upon the 
execution of SOES orders, provided the market maker's quote size is 
equal to or greater than the applicable SOES tier size; or (b)

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utilize Nasdaq's autorefresh feature that automatically updates a 
market maker's quote after its quote size has been decremented.
    Notwithstanding the 20-day Rule, NASD Rule 4619 affords market 
makers the ability to obtain an ``excused'' market maker withdrawal in 
certain limited circumstances. Market makers receiving ``excused'' 
withdrawals are not subject to the 20-Day Rule and can re-enter their 
quotes once the circumstances justifying the withdrawal no longer 
exist. For example the rule currently allows excused withdrawals for: 
(1) The duration of ``cooling off'' periods mandated by certain rules 
under Regulation M of the Exchange Act (formerly Exchange Act Rule 10b-
6); (2) physical circumstances beyond the market maker's control; (3) 
religious holidays (provided the request is submitted 5 business days 
in advance of the holiday); (4) vacations (provided the request is 
received 20 business days in advance of the vacation and is made by a 
market maker with 3 or less Nasdaq terminals); (5) involuntary failures 
to maintain clearing arrangements; and (6) other legal requirements, 
(e.g., the market maker is in possession of material non-public 
information).
    The handling of excused withdrawal requests and the reinstatement 
of market makers who have been ``SOESed out of the Box'' was criticized 
in the SEC's 21(a) Report on the NASD and The Nasdaq Stock Market.\3\ 
In sum, the SEC found that the NASD had improperly granted waivers of 
the 20-Day Rule for market makers that were ``SOESed out of the Box'' 
and that the NASD had not followed its own rules when granting excused 
withdrawals (e.g., excused withdrawals for vacations were granted with 
less than 20-days advance notice). As a result, the SEC stated in its 
21(a) Report that:

    \3\ See Appendix to Report Pursuant to Section 21(a) of the 
Securities Exchange Act of 1934 Regarding the NASD and The Nasdaq 
Stock Market (``21(a) Report''), SEC, August 8, 1996, at p. 91-95.
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[t]he NASD's failure to enforce its excused withdrawal rules has 
fostered an environment that allowed market makers to avoid their 
responsibilities to maintain continuous quotes in the securities in 
which they made markets. Market makers were able to withdraw 
voluntarily from SOES beyond the permitted five-minute window, or 
otherwise withdraw from the market during periods of volatility 
without substantial risk that the NASD will enforce a twenty-day 
suspension.\4\

    \4\ Id. at p. 94.
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    Accordingly, in order to ensure that market makers are not able to 
avoid or circumvent their market making obligations through 
inappropriate excused market maker withdrawals or inappropriate market 
maker reinstatements, the NASD and Nasdaq are submitting this rule 
proposal. As detailed below, the proposed changes are in three general 
areas: (1) Market maker reinstatements upon being ``SOESed out of the 
Box'' or after accidental market maker withdrawals; (2) bases for 
excused withdrawals; and (3) the jurisdiction of the Market Operations 
Review Committee (``MORC'') over excused market maker withdrawals and 
market maker reinstatements. In sum, by establishing more objective 
standards for the reinstatement of market makers who have been ``SOESed 
out of the Box'' or accidentally withdraw from a stock and modifying 
the rules to better reflect the operational realities of the 
marketplace, the NASD and Nasdaq believe the proposed modifications are 
responsive to the deficiencies noted in the SEC's 21(a) Report. 
Following are the specific rule changes proposed by the NASD and 
Nasdaq.
1. Reinstatement of Market Makers Upon Being ``SOESed Out of the Box'' 
and for Accidental Withdrawals
a. Reinstatements Upon Being ``SOESed Out of the Box''
    The proposed rule change is designed to ensure that market maker 
reinstatements will only be made when it is clear that a market maker 
was not attempting to avoid its market making obligations. 
Specifically, the proposed changes to Rule 4730 provides that a market 
maker can be reinstated only if: (1) The market maker notifies Market 
Operations to request reinstatement within one hour of being ``SOESed 
out of the Box,'' and immediately thereafter provides written 
notification of the request; (2) a designated Nasdaq officer determines 
that the withdrawal was not an attempt by the market maker to avoid its 
obligations to make a continuous two-sided market, taking into account 
factors including market conditions at the time, the frequency with 
which the firm has been SOESed out of the Box, procedures adopted by 
the firm to avoid doing so inadvertently, and the length of time before 
the firm sought reinstatement; (3) it was a Primary Market Maker at the 
time it was SOESed out of the Box; and (4) the reinstatement would not 
result in the market maker's firm exceeding certain limitations on the 
number of reinstatements per year. In particular, under the proposal, 
firms that simultaneously made markets in less than 250 stocks during 
the previous calendar year could receive no more than four 
reinstatement per year; firms that simultaneously made markets in more 
than 250 but less than 500 stocks during the previous calendar year 
could receive one more than six reinstatements per year; and firms that 
simultaneously made markets in more than 500 stocks during the previous 
calendar year could receive no more than twelve reinstatements per 
year. Decisions to reinstate a market maker would be made by Nasdaq 
Market Operations staff and appeals of such decisions would be 
considered by the MORC.
    Finally, notwithstanding the numerical limitations and requirements 
set forth above, in instances where a member firm experiences a 
documented technological constrain or failure involving either is own 
automated system or an automated system operated by Nasdaq, the market 
maker is a manager or co-manager of a secondary offering that is about 
to occur or has just occurred, or there has been a significant decline 
in the number of market makers in a particular issue, the NASFD and 
Nasdaq propose that Nasdaq should have the authority to reinstate a 
market maker that has been ``SOESed out of the Box'' if such 
reinstatement is necessary to protect investors or the integrity of the 
market. Specifically, before any such reinstatement could occur, Nasdaq 
staff would have to make a finding that the reinstatement is necessary 
for the protection of investors or the maintenance of fair and orderly 
markets and determine that the withdrawal was not an attempt by the 
market maker to avoid its obligation to make a continuous two-sided 
market.
b. Reinstatements for Accidental Withdrawals
    There have been instances in the past where market makers have 
accidentally withdrawn from a stock because they inadvertently typed 
the wrong stock symbol. Because the rules currently do not provide that 
market makers can be reinstated in these instances, Nasdaq and the NASD 
propose that Rule 4620 be amended to permit such reinstatements 
provided the withdrawal was clearly accidental and did not reflect an 
attempt by the market maker to avoid its market making obligations. 
Specifically, under the proposal, a market maker that accidently 
withdraws as a market maker may be reinstated if: (1) The market maker 
notifies Market Operations of the accidental withdrawal within one hour 
of such withdrawal, and immediately thereafter provides written 
notification of the withdrawal and request; (2) it is clear that the 
withdrawal was inadvertent and the market maker was not attempting to

[[Page 53678]]

avoid its market making obligations; and (3) the market maker's firm 
would not exceed specific reinstatement limitations per year. In 
particular, firms that simultaneously make markets in less than 250 
stocks during the previous calendar year could receive no more than two 
reinstatements per year. Firms that simultaneously made markets in more 
than 250 but less than 500 stocks could receive no more than three 
reinstatements per year. Firms that simultaneously make markets in more 
than 500 stocks could receive no more than six reinstatements per year.
    In addition, factors that would be considered in granting a 
reinstatement include: (1) The number of accidental withdrawals by the 
market maker in the past as compared to other market makers making 
markets in a comparable number of stocks; (2) the similarity between 
the symbol of the stock intended to be withdrawn and the symbol of the 
stock actually withdrawn; (3) market conditions; (4) whether the 
withdrawal served to reduce the market maker's exposure to market risk; 
and (5) the timeliness with which the market maker notified Nasdaq 
Market Operations of the error. Determinations initially would be made 
by Nasdaq Market Operations staff and be subject to review by the MORC.
2. Bases for Excused Withdrawals
    Rule 4619(b) presently provides that excused withdrawal status may 
be granted for a variety of reasons provided that certain conditions 
are satisfied. Specifically, as noted above, excused withdrawal status 
may be granted for: (1) The duration of ``cooling off'' periods 
mandated by Regulation M; (2) physical circumstances beyond the market 
maker's control; (3) religious holidays (provided the request is 
submitted 5 business days in advance of the holiday); (4) vacations 
(provided the request is received 20 business days in advance of the 
vacation and is made by a market maker with 3 or less Nasdaq 
terminals); (5) involuntary failures to maintain clearing arrangements; 
and (6) other legal requirements (e.g., the market maker is in 
possession of material non-public information). While the NASD and 
Nasdaq continue to believe that it is critical for the maintenance of 
the integrity of the market for Nasdaq to grant excused withdrawals 
only when warranted, particularly in light of the SEC's 21(a) Report, 
the NASD and Nasdaq nevertheless believe that the present excused 
withdrawal rule is not drafted broadly enough to encompass all of the 
legitimate reasons for an excused withdrawal. The NASD and Nasdaq also 
believe that the time parameters for advance notice of vacations and 
religious holidays are unnecessary.
    Accordingly, the NASD and Nasdaq propose the following amendments 
to Rule 4619(b). First, excused withdrawals may be granted for 
``circumstances'' beyond the market maker's control, not just 
``physical circumstances'' beyond its control. With this amendment, 
unpredictable events, such as jury duty, bomb threats, the birth of a 
child, or a sudden illness, could be used as a basis for an excused 
withdrawal. Second, requests for excused withdrawals based on vacations 
and religious holidays may be submitted one business day in advance of 
the proposed withdrawal. Requests for excused withdrawals based on 
legal or regulatory requirements will continue to be made in writing, 
although Nasdaq recognizes that counsel to market makers often do not 
want to disclose the specific legal basis for their withdrawal request, 
particularly when the basis for the withdrawal is that the market maker 
is in possession of material, non-public information. In this 
connection, Nasdaq would continue its current practice of apprising 
NASD Regulation, Inc. of all such requests.
3. Jurisdiction of the MORC Over Excused Market Maker Withdrawals and 
Market Maker Reinstatements
    Presently, appeals of Nasdaq staff determinations concerning 
excused withdrawal requests and market Maker reinstatements are within 
the purview of the NASD's Qualifications Committee's jurisdiction 
pursuant to NASD Rule 4730(b)(8). Pursuant to the Plan of Allocation 
and Delegation of Functions by NASD to Subsidiaries, however, The Board 
of Directors of Nasdaq has delegated the MORC jurisdiction over such 
matters. Accordingly, the NASD proposes to amend Rules 4619, 4620, and 
4730, to effectuate the transfer of jurisdiction over these matters 
from the Qualifications Committee to the MORC.
    The NASD believes that the proposed rule changes are consistent 
with Sections 15A(b)(6), 15A(b)(9), 15A(b)(11) and 11A(a)(1)(C) of the 
Act. Among other things, Section 15A(b)(6) requires that the rules of a 
national securities association be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and in general to 
protect investors and the public interest. Section 15A(b)(9) provides 
that the rules of the Association may not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act. Section 15A(b)(11) empowers the NASD to adopt rules 
governing the form and content relating to securities in the Nasdaq 
market. Such rules must be designed to produce fair and informative 
quotations, prevent fictitious and misleading quotations, and promote 
orderly procedures for collecting and distributing quotations. Section 
11A(a)(1)(C) provides that it is in the public interest to, among other 
things, assure the economically efficient execution of securities 
transactions and the availability to brokers, dealers, and investors of 
information with respect to quotations for and transactions in 
securities.
    In particular, by ensuring that market makers will only be relieved 
of their market making obligations for legitimate reasons and that 
waivers of the ``20-day rule'' will only be made when it is absolutely 
clear that the market maker receiving the waiver was not attempting to 
avoid its market making obligations when it withdrew or was withdrawn 
from the security, the NASD and Nasdaq believe the proposed rule change 
will help to ensure that market makers are abiding by their obligations 
to make continuous, two-sided markets and promote quote competition 
among market makers. Such competition among market makers will, in 
turn, enhance the integrity of the Nasdaq market, the best execution of 
customer orders, and the price discovery process for Nasdaq securities.

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

    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

[[Page 53679]]

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.

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-97-04, and 
should be submitted by November 5, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-27281 Filed 10-14-97; 8:45 am]
BILLING CODE 8010-01-M