Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices 53367

5 17 U.S.C. 78s(B)(2).

6 17 CFR 200.30–3(a)(12).

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

2The requirement in Rule 2710(b)(13) will expire

no later than January 1, 2000.

after the date of publication of filing

thereof in the Federal Register.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,5 that the

proposed rule change, SR–NASD–97–

73, be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27050 Filed 10–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39197; File No. SR–NASD–

97–68]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by National Association

of Securities Dealers, Inc. Relating to

Syndicate Covering Transactions and

Members’ Obligations To Obtain an

Underwriting Activity Report

October 3, 1997.

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

Securities Exchange Act of 1934

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

September 8, 1997, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) filed with

the Securities and Exchange

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

the prposed rule change and on

September 17, 1997, the NASD filed

Amendment No. 1. The proposed rule

change and Amendment No. 1 are

described in Items I, II, and III below,

which Items have been prepared by

NASD Regulation, Inc. (‘‘NASD

Regulation’’). The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons. For the reasons

discussed below, the Commission is

granting accelerated approval of the

proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation is proposing to

amend NASD Rules 2710, 4624, and

6540. Below is the text of the proposed

rule change. Proposed new language is

in italics; proposed deletions are in

brackets.

2700. Securities Distributions

2710. Corporate Financing Rule—

Underwriting Terms and Arrangements

(a) Definitions

No change.

(b) Filing Requirements

(1) through (10)

No Change.

(11) Request for Underwriting Activity

Report

Notwithstanding the availability of an

exemption from filing under

subparagraph (b)(7) of this Rule, a

member acting as a manager (or in a

similar capacity) of a distribution of a

publicly traded subject security or

reference security that is subject to SEC

Rule 101 or an ‘‘actively-traded’’

security under SEC Rule 101 (except for

a security listed on a national securities

exchange) shall submit a request to the

Corporate Financing Department for an

Underwriting Activity Report with

respect to the subject and/or reference

security in order to facilitate compliance

with SEC Rules 101, 103, or 104, and

other distribution-related Rules of the

Association. The request shall be

submitted at the time a registration

statement or similar offering document

is filed with the Department, the SEC,

or other regulatory agency, or, if not

filed with any regulatory agency, at least

two (2) business days prior to the

commencement of the restricted period

under Sec Rule 101. The request shall

include a copy of the registration

statement or similar offering document

(if not previously submitted pursuant to

subparagraph (b)(5) of this Rule). If no

member is acting as managing

underwriting of such distribution, each

member that is a distribution participant

or an affiliated purchaser shall submit a

request for an Underwriting Activity

Report, unless another member has

assumted responsibility for compliance

with this subparagraph. For purposes of

subparagraphs (b) (11) and (12), SEC

Rules 100, 101, 103, and 104 are rules

of the Commission adopted under

Regulation M and the following terms

shall have the meanings as defined in

SEC Rule 100: A distribution, A

distribution participant, A reference

security, A restricted period, and A

subject security.

(12) Submission of Pricing Information

A member acting as a manager (or in

a similar capacity) of a distribution

[subject to subparagraph (b)(11)] of

securities that are listed on a national

securities exchange and considered a

subject security or reference security

that is subject to SEC Rule 101 or an

‘‘actively-traded’’ security under SEC

Rule 101 or a distribution of any other

securities that are considered ‘‘activelytraded’’ under SEC Rule 101 shall

provide written notice to the Market

Regulation Department of NASD

Regulation, Inc., no later than the close

of business the day the offering

terminates, that includes the date and

time of the pricing of the offering, the

offering price, and the time the offering

terminated, which notice may be

submitted on the Underwriting Actvity

Report.

(13) Information on Syndicate Covering

Transactions

A member acting as a manager (or in

a similar capacity) of a distribution of

a publicly traded subject security or

reference security that is subject to SEC

Rule 101 or an ‘‘actively-traded’’

security under SEC Rule 101 shall, no

later than thirty (30) days after the

effective date of the offering, maintain

information as required by the

Corporate Financing Department of

NASD Regulation, Inc. on the amount of

the syndicate short position in a manner

consistent with SEC Rule 17a–2.2

(c) Underwriting Compensation and

Arrangements

No change.

4000. The NASDAQ Stock Market

4624. Penalty Bids and Syndicate

Covering Transactions

(a) A market maker acting as a

manager (or in a similar capacity) of a

distribution of a Nasdaq security that is

a subject or reference security under

SEC Rule 101 shall provide written

notice to the Corporate Financing

Department of NASD Regulation, Inc. of

its intention to impose a penalty bid on

syndicate members or to conduct

syndicate covering transactions

pursuant to SEC Rule 104 prior to

imposing the penalty bid or engaging in

the first syndicate covering transaction.

A market maker that intends to impose

a penalty bid on syndicate members

may request that its quotation be

identified as a penalty bid on Nasdaq

pursuant to paragraph (c) below.

(b) The notice required by paragraph

(a) shall include:

(1) The identity of the security and its

Nasdaq symbol;

(2) The date the member is intending

to impose the penalty bid and/or

conduct syndicate covering

transactions[; and
53368 Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices

3Securities Exchange Act Release No. 38360

(March 4, 1997), and amended Securities Exchange

Act Release No. 38399 (March 14, 1997).

(3) The amount of the syndicate short

position, in the case of syndicate

covering transactions]

(c) Notwithstanding paragraph (a), a

market maker may request that its

quotation be identified as a penalty bid

on Nasdaq [display] by providing notice

to Nasdaq Market Operations, which

notice shall include the date and time

that the penalty bid identified should be

entered on Nasdaq and, if not in writing,

shall be confirmed in writing no later

than the close of business the day the

penalty bid identified is entered on

Nasdaq.

(d) The written notice required by

[paragraphs (a) and (c) of] this Rule may

be submitted on the Underwriting

Activity Report [by including the

information required by subparagraphs

(b)(1) and (b)(2) or paragraph (c)].

6500. OTC Bulletin Board Service

6540. Requirements Applicable to

Market Makers

(a) No change.

(b) No change.

(1) Permissible Quotation Entries.

(A)–(C)—No change.

(D) Any member that intends to be a

distribution participant in a distribution

of securities subject to SEC Rule 101, or

is an affiliated purchaser in such

distribution, and is entering quotations

in an OTCBB-eligible security that is the

subject security or reference security of

such distribution shall, unless another

member has assumed responsibility for

compliance with this paragraph:

(i) No change.

(ii) No change.

(iii) provide written notice to the

Corporate Financing Department of

NASD Regulation, Inc. of its intention to

impose a penalty bid or to conduct

syndicate covering transactions

pursuant to SEC Rule 104 prior to

imposing the penalty bid or engaging in

the first syndicate covering transaction.

Such notice shall include information as

to the date the penalty bid or first

syndicate covering transaction will

occur [and the amount of the syndicate

short position]; and

(iv) No change.

(E) The written notice required by

subparagraphs (b)(1)(D) (i), (iii) and (iv)

of this rule may be submitted on the

Underwriting Activity Report provided

by the Corporate Financing Department

of NASD Regulation, Inc. [by including

the information required by those

subparagraphs.]

(F) No change.

(2) through (4) No change.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NASD Regulation 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 III below. 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

On April 1, 1997, NASD Rules

designed to facilitate compliance with

the SEC’s Regulation M became

effective.3 Rule 104 of Regulation M

requires members acting as managing

underwriters to notify the appropriate

regulator of the market for the security

in distribution of a member’s intention

to engage in syndicate short covering

transactions. It is the understanding of

NASD Regulation staff that the purpose

of this requirement is to establish a

database at the regulator of those

offerings in which syndicate short

covering transactions may have been

conducted, thereby facilitating a study

of syndicate short covering practices by

the staff of the SEC. Because the

Association has traditionally been

responsible for regulating the

permissible amount of over-allotment

options that may be utilized to cover

syndicate short positions in public

offerings, NASD Regulation believes

that the Association has a long-standing

interest in developing information to

assist it and the SEC in the regulation

of the over-allotment process.

To allow NASD members to comply

with their notification obligations under

Rule 104, NASD Regulation developed a

standardized form designated as the

Regulation M Trading Notification. Both

NASD Rule 4624 regarding The Nasdaq

Stock Market and NASD Rule 6540

regarding the OTC Bulletin Board

Service require that members include

the amount of the syndicate short

position on the Regulation M Trading

Notification. This latter information is

not required to be provided under SEC

Rule 104 of Regulation M.

Members of the industry have

expressed concern regarding their

ability to provide accurate data on the

amount of a syndicate short position at

the time the Regulation M Trading

Notification is required to be submitted

i.e., prior to the first syndicate covering

transaction. At that time, the member

cannot generally provide accurate

information as to the total amount of the

syndicate short position.

While NASD Regulation believes it

important to be able to collect accurate

information on the amount of the

syndicate short position in order to

assist the SEC in its study of syndicate

short covering activities, such

information need not be immediately

provided to the Association. In order to

address the concerns of the industry,

NASD Regulation is proposing to amend

NASD Rule 4624 and NASD Rule 6540

to delete the current requirement to

provide immediate information on the

amount of syndicate short positions. In

its place, NASD Regulation is proposing

to amend Rule 2710, the Corporate

Financing Rule, to establish a new

requirement in Subparagraph (b)(13)

that, no later than 30 days after the

effective date of the offering, the

managing underwriter shall maintain

information as required by the

Corporate Financing Department of

NASD Regulation, Inc. on the amount of

the syndicate short position and that

such information be retained in the

same manner as the managing

underwriter’s syndicate covering

transaction records under SEC Rule

17a–2. Rule 17a–2 requires that a

managing underwriter separately

maintain information on stabilizing

transactions and syndicate covering

transactions. It is anticipated that the

managing underwriter will maintain

with its records of syndicate covering

transactions, as required by Rule 17a–2,

a record of the amount of the syndicate

short position. NASD Regulation

intends to require that the information

to be retained by the managing

underwriter consist of whether the

syndicate short position was no greater

than the over-allotment option, or

whether a naked short position was less

than 1%, between 1% and 5%, between

5% and 10%, or over 10% of the

offering size. The proposed change to

NASD Rule 2710 includes a sunset

provision to eliminate the requirement

to retain information on the amount of

syndicate short positions at the

conclusion of the study of syndicate

short covering practices, but no later

than January 1, 2000.

In addition, NASD Regulation is

proposing to amend Subparagraph

(b)(11) of Rule 2710 to conform its rule

language to that of Subparagraph (b)(12)

and to the Association’s original intent
Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices 53369

4An ‘‘actively-traded’’ security is a subject or

reference security with a value of average daily

trading volume of at least $1 million, which is

issued by an issuer whose common equity

securities have a public float of at least $150

million. 5 15 U.S.C. 78o–3.

6 15 U.S.C. 78c(f).

7 17 U.S.C. 78s(B)(2).

8 17 CFR 200.30–3(a)(2).

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

2 17 CFR 240.19b–4.

regarding the scope of that provision.

The proposed rule change would clarify

that the managing underwriter is

required to request an Underwriting

Activity Report with respect to a

distribution of a security that is

considered an ‘‘actively-traded’’ security

under SEC Rule 101.4 Currently, the

language of Subparagraph (b)(11) is

misleading in that it only imposes this

requirement with respect to subject or

reference securities that are ‘‘subject to

SEC Rule 101.’’ Because ‘‘activelytraded’’ securities are exempt from SEC

Rule 101, they are not considered

‘‘subject to’’ SEC Rule 101. In Notice to

Members 97–10 (March 1997),

announcing adoption of the

amendments of the NASD to implement

Regulation M, the NASD stated that the

Underwriting Activity Report’’ will

indicate whether the security qualifies

under SEC Rule 101 as an activelytraded security or for the one-day or

five-day restricted periods.’’ Thus, the

proposed change to Subparagraph

(b)(11) will make the rule language

consistent with the Association’s

requirement that the managing

underwriter request an Underwriting

Activity Report for securities that are

considered ‘‘actively-traded’’ under SEC

Rule 101.

Moreover, NASD Regulation is

proposing to amend Subparagraph

(b)(11) to exclude exchange-listed

securities from the requirement that the

managing underwriter obtain an

Underwriting Activity Report.

Originally, it had been anticipated that

the managing underwriter would be

provided information on the value of

average daily trading volume and

market value of public float with respect

to exchange-listed securities, in addition

to securities included in The Nasdaq

Stock Market, Inc. or quoted on the OTC

Bulletin Board Service. However, since

this information has not been available,

the proposed rule change would

eliminate the obligation of managing

underwriters to request the

Underwriting Activity Report with

respect to exchange-listed securities.

The managing underwriter of an offering

of exchange-listed securities would,

nonetheless, continue to be responsible

under Subparagraph (b)(12) to advise

the Market Regulation Department of

information regarding the pricing and

termination of the offering. Conforming

amendments are made to Subparagraph

(b)(12) in light of this proposed change

to Subparagraph (b)(11). Finally,

Subparagraph (b)(12) is also proposed to

be revised to clarify that the managing

underwriter of any offering of securities

considered ‘‘actively-traded’’ under SEC

Rule 101 must also advise the Market

Regulation Department of information

on pricing and termination.

The NASD believes that the proposed

rule change is consistent with the

provisions of Section 15A(b)(2) 5 of the

Act in that the proposed rule change

will enforce and facilitate compliance

by NASD members with the

requirements of SEC Regulation M.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation 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, as amended.

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. 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 the file

number in the caption above and should

be submitted by November 4, 1997.

IV. Commission’s Findings and Order

Granting Accelerated Approval of the

Proposed Rule Change

The Commission finds that the

NASD’s proposal is consistent with the

Act and the rules and regulations

thereunder applicable to a registered

national securities association.

Specifically, the provisions of Section

15A(b)(2) of the Act which requires that

an association enforce compliance with

Securities Exchange Act Rules in

addition to the rules of the association.

The Commission believes that the

proposal will enforce and facilitate

compliance by NASD members with the

requirements of Regulation M, SEC

Rules 100 through 105.

In addition, the Commission finds

that the NASD’s proposal is consistent

with the provisions of Section 15A(b)(6)

of the Act which requires, in part, that

an association have rules that are

designed to prevent fraudulent and

manipulative acts and practices,

promote just and equitable principals of

trade, and in general, to protect

investors. In approving this proposed

rule change, the Commission notes that

it has also considered the proposal’s

impact on efficiency, competition, and

capital formation.6

The Commission, therefore, finds

good cause for approving the proposed

rule change prior to the thirtieth day

after the date of publication of filing

thereof in the Federal Register.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,7 that the

proposed rule change, SR–NASD–97–

68, be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27051 Filed 10–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39200; File No. SR–NYSE–

97–25]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the New York Stock Exchange, Inc., To

Amend Its Rule 382 Relating to

Carrying Agreements

October 3, 1997.

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

Securities Exchange Act of 1934

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

notice is hereby given that on

September 16, 1997, the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or