[Federal Register Volume 62, Number 199 (Wednesday, October 15, 1997)]
[Notices]
[Pages 53673-53674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27280]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39216; File No. SR-NASD-97-72]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the National 
Association of Securities Dealers, Inc., Relating to Extension of the 
Nasdaq International Service Pilot Program

October 7, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 30, 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 and II 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 parties 
and approving this proposal on an accelerated basis.
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    \1\ 15 U.S.C. Sec. 78s(b)(1)(1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD proposes to extent for one year, until October 9, 1998: 
(1) The pilot term of the Nasdaq International Service (``Service''); 
and (2) the effectiveness of certain rules (``International Rules'') 
that are unique to the Service. The proposal does not entail any 
modification of the International Rules. The present authorization for 
the Service and the International Rules expires on October 11, 1997.

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

    The NASD proposes to extend for one year, until October 9, 1998, 
the pilot operation of the Service and the effectiveness of the 
International Rules governing broker-dealers' access to and use of the 
Service. The existing pilot operation of the Service and the 
International Rules was originally authorized by the Commission in 
October 1991 \2\ and the Service was launched on January 20, 1992. The 
pilot has since been extended \3\ and is set to expire on October 11, 
1997.\4\
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    \2\ See Securities Exchange Act Release No. 29812 (October 11, 
1991), 56 FR 52082 (October 17, 1991) (order approving File No. SR-
NASD-90-33) (``Pilot Approval Order'').
    \3\ See Securities Exchange Act Release No. 33037 (October 8, 
1993), 58 FR 53752 (October 18, 1993) (order approving File No. SR-
NASD-93-50) (extending the pilot operation of the Service for two 
years through October 11, 1995).
    \4\ See Securities Exchange Act Release No. 36359 (October 11, 
1995), 60 FR 53820 (October 17, 1995) (order approving File No. SR-
NASD-95-46) (extending the pilot operation of the Service for two 
years through October 11, 1997).
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    The Service supports an early trading session running from 3:30 
a.m. to 9:00 a.m. Eastern Time (``ET'') on each U.S. business day 
(``European Session'') that overlaps the business hours of the London 
financial markets. Participation in the Service is voluntary and is 
open to any authorized NASD member firm or its approved broker-dealer 
affiliate in the U.K. A member participates as a Service market maker 
either by staffing its trading facilities in the U.S. or the facilities 
of its approved affiliate during the European Session. The Service also 
has a variable opening feature that permits Service market makers to 
elect to participate starting from 3:30 a.m., 5:30 a.m., or 7:30 a.m. 
ET. The election is required to be made on a security-by-security basis 
at the time a firm registers with the NASD as a Service market 
maker.\5\ At present, there are no Service market makers participating 
in the Service.
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    \5\ Regardless of the opening time chosen by the Service market 
maker, the Service market marker is required to fulfill all of the 
obligations of a Service market maker from that time (i.e., 3:30 
a.m., 5:30 a.m., or 7:30 a.m. ET) until the European Session closes 
at 9:00 a.m. ET. See Securities Exchange Act Release No. 32471 (June 
16, 1993), 58 FR (June 22, 1993) (order approving File No. SR-NASD-
92-54).
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    As noted above, the NASD is seeking to extend the pilot term for 
one year. During this period, the NASD will continue to evaluate the 
Service's operation and consider possible enhancements to the Service 
to broaden

[[Page 53674]]

market marker participation. The NASD views the Service as a 
significant experiment in expanding potential opportunities for 
international trading via systems operated by the Nasdaq Stock Market, 
Inc. (``Nasdaq''). Accordingly, The NASD believes that this pilot 
operation warrants an extension to permit possible enhancements that 
will increase the Service's utility and attractiveness to the 
investment community.\6\ The NASD believes it is extremely important to 
preserve this facility and the opportunities it provides, especially in 
light of the increasingly global nature of the securities markets and 
the trend of cross-border transactions generally.
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    \6\ Assuming that the pilot term is extended, the NASD will 
continue to supply the Commission with the statistical report 
prescribed in the initial Pilot Approval Order for the Service at 
six-month intervals.
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    In addition, the Service serves an invaluable role as a critical 
early warning mechanism in the context of significant changes involving 
Nasdaq software and hardware systems. Specifically, because the Service 
operates in the early morning hours prior to the opening of trading in 
the domestic session of Nasdaq, the Service has provided for the early 
detection of systems or communications problems when Nasdaq implements 
these systems changes.
    The NASD believes that the proposed rule change is consistent with 
Sections 11A(a)(1) (B) and (C) and 15A(b)(6) of the Act. Subsections 
(B) and (C) of Section 11A(a)(1) set forth the Congressional goals of 
achieving more efficient and effective market operations, broader 
availability of information with respect to quotations for securities, 
and the execution of investor orders in the best market through the use 
of advanced data processing and communications techniques. Section 
15A(b)(6) requires, among other things, that the NASD's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principals of trade, and to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities. The NASD believes that the 
proposed extension of the Service and the International Rules is fully 
consistent with these statutory provisions.

(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. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The NASD has requested that the proposed rule change be given 
accelerated effectiveness pursuant to Section 19(b)(2) of the Act so 
that the operation of the pilot program for the Service may continue on 
an uninterrupted basis. In addition, as noted above, the NASD's 
proposal entails no modification to the International Rules or the 
Service, which previously were subject to the full notice comment 
period required by Section 19(b) of the Act when they were approved 
originally by the Commission. Accordingly, the NASD believes good cause 
exists to extend the effectiveness of the pilot program for the Service 
on an accelerated basis.
    The Commission finds that the proposed rule change is consistent 
with sections 11A(a)(1) (B) and (C) and 15A(b)(6) of the Act. Sections 
11A(a)(1) (B) and (C) of the act set forth the Congressional goals of 
achieving more efficient and effective market operations, broader 
availability of information with respect to quotations for securities, 
and the execution of investor orders in the best market through the use 
of advanced data processing and communications techniques. Section 
15A(b)(6) requires, among other things, that the NASD's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principals of trade, and to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities.
    The Commission continues to view the Service as a significant 
experiment in expanding potential opportunities for international 
trading via systems operated by Nasdaq. Although there are no market 
makers participating currently in the Service, the NASD plans to 
reevaluate the Service's operation and consider possible enhancements 
to the Service to broaden market maker participation. In addition, the 
NASD has stated that the Service has played a valuable role by 
providing for the early detection of systems or communications problems 
when Nasdaq implements significant changes in its hardware and software 
systems. Accordingly, the Commission believes that the pilot program 
warrants an extension to permit possible enhancements that will 
increase the Service's utility to the investment community.\7\ The NASD 
must file any changes to the operation of the Service with the 
Commission pursuant to Section 19(b)(2) of the Act.
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    \7\ The NASD continues to be responsible for supplying the 
Commission with the statistical reports prescribed in the initial 
Pilot Approval Order at six-month intervals. However, the supporting 
documentation is no longer required, unless otherwise requested by 
the Commission.
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    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of notice of 
filing thereof in order to ensure the continuous operation of the 
Service through October 9, 1998. The current authorization for the 
Service expires on October 11, 1997.

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 at 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-97-72 and should 
be submitted by November 5, 1997.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-NASD-97-72) is approved 
through October 9, 1998.

    \8\ 15 U.S.C. Sec. 78f(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-27280 Filed 10-14-97; 8:45 am]
BILLING CODE 8010-01-M