58590 Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Notices

7At present, NASD Regulation has such data with

respect to the OTCBB but does not have access to

historical quotation data with respect to the Pink

Sheets. NASD Regulation recently submitted to the

Commission a proposed rule change (SR–NASD–

00–42) that would require NASD members that

publish quotations in the Pink Sheets (or any

similar automated quotation system) to record and

maintain priced quotations and unpriced

indications of interest data and to report such

quotation data to NASD Regulation upon request.

8The proposed rule change defines the term

quotation medium as any inter-dealer quotation

system or any publication or electronic

communications network or other device that is

used by brokers or dealers to make known to others

their interest in transactions in any security,

including offers to buy or sell at a stated price or

otherwise, or invitations of offers to buy or sell.

9 In approving this rule, the Commission has

considered its impact on efficiency, competition,

and capital formation. See 15 U.S.C. 78c(f).

10 15 U.S.C. 78o–3(b)(6) and (b)(9).

11See Securities Exchange Act Release No. 25637

(May 2, 1988), 53 FR 16488 (May 9, 1988).

12See supra note 7.

13 15 U.S.C. 78s(b)(2).

14 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3110(b)(2) requires that members, for

each transaction in a non-Nasdaq

security, indicate on the order ticket the

name of each dealer contacted and each

quotation received with respect to that

security, in order to determine the best

inter-dealer market. NASD Regulation

has proposed to eliminate this

obligation when two or more priced

quotations for that security are

displayed in an inter-dealer quotation

system if: (1) the system permits

quotation updates on a real-time basis,

and (ii) NASD Regulation has access to

the quotation data.7

Third, NASD Regulation has proposed

to add a new provision to Rule 2320(g)

that will require members that display

quotations for a given non-Nasdaq

security in two or more quotation

mediums that permit quotation updates

on a real-time basis to provide the same

priced quotation in each medium.8

III. Discussion

A. General

After careful review, the Commission

finds that the proposed rule change is

consistent with the requirements of the

Act and the regulations thereunder

applicable to the NASD.9 In particular,

the Commission believes that the

proposal is consistent with Sections

15A(b)(6) and 15A(b)(9) of the Act.10

Section 15A(b)(6) requires, among other

things, 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 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)

requires that the rules of the association

not impose any burden on competition

not necessary or appropriate in

furtherance of the purposes of the Act.

B. Amendment to Three Quote Rule and

Corresponding Recordkeeping Provision

The Commission approved the NASD

proposal that instituted the Three Quote

Rule in 1988.11 The Three Quote Rule

was an amendment to the NASD’s

interpretation relating to best execution

of retail transactions in non-Nasdaq

securities. The Rule’s purpose is to

assure that NASD members fulfill their

duty to provide customers with best

execution for transactions in nonNasdaq securities, especially illiquid

securities with non-transparent prices.

Currently, the Three Quote Rule

requires members to obtain quotes from

three dealers before executing a

transaction in a non-Nasdaq security on

behalf of a customer. Under NASD Rule

3110(b)(2), the companion

recordkeeping rule, members are

required to indicate on the order ticket

for each transaction in a non-Nasdaq

security the names of the dealers

contacted and the prices of the

quotations. NASD Regulation’s current

proposal would exempt from the Three

Quote Rule transactions involving a

non-Nasdaq security when there are two

or more priced quotations for that

security displayed in an inter-dealer

quotation system that permits quotation

updates on a real-time basis. A

corresponding amendment to NASD

Rule 3110(b)(2) would eliminate the

requirement to indicate on the order

ticket for a transaction in a non-Nasdaq

security the dealers contacted and

quotations received, provided there are

two or more priced quotations for that

security displayed in an inter-dealer

quotation system and NASD Regulation

has access to the historical quotation

information.12

In light of the significant

technological advances that have

occurred in the markets for non-Nasdaq

securities since adoption of the Three

Quote Rule, the Commission believes it

is reasonable and consistent with the

Act to limit the Rule’s applicability to

those situations when fewer than two

priced quotes for a non-Nasdaq security

are posted in an inter-dealer quotation

medium. The Commission also finds

that, in light of the proposed

amendment to the Three Quote Rule,

the corresponding amendment to the

recordkeeping provisions of NASD Rule

3110(b)(2) is reasonable and consistent

with the purposes of the Act. The

Commission notes that, whether or not

a transaction in a non-Nasdaq security

is subject to the Three Quote Rule, the

member executing the transaction must

satisfy its duty of best execution.

C. Requirement to Post Same Quotation

in Different Mediums

Currently, an NASD member may

display different priced quotations for

the same non-Nasdaq security in

different quotation mediums. The

Commission believes that this practice

can be confusing to market participants

and, in particular, to public investors.

Requiring that members display

consistent priced quotations in multiple

quotation mediums will enhance the

ability of market participants to

ascertain the best inter-dealer market for

a non-Nasdaq security. The Commission

finds that the proposed amendment

implementing this requirement is

consistent with the purposes of the Act.

IV. Conclusion

It Is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,13 that the

proposed rule change (SR–NASD–00–

20) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary

[FR Doc. 00–25025 Filed 9–28–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43318; File No. SR–NASD–

00–54]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by National

Association of Securities Dealers, Inc.

on Use of the .T Modifier for Extended

Hours Trades in Listed Securities

September 21, 2000.

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 1, 2000, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’), through its

wholly owned subsidiary the Nasdaq

Stock Market, Inc. (‘‘Nasdaq’’), 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

Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Notices 58591

3See letter from Peter R. Geraghty, Assistant

General Counsel, Nasdaq, to Katherine England,

Assistant Director, Division of Market Regulation,

SEC, dated September 18, 2000 (‘‘Amendment No.

1’’). In Amendment No. 1, Nasdaq amended the

proposed rule language to clarify that transactions

in CQS securities that occur between 9:30 a.m. and

4:00 p.m. Eastern Time and that not reported within

90 seconds after execution must be designated as

late by using the appropriate modifier.

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

5 17 CFR 240.19b–4(f)(6).

6NASD Rule 4617 defines normal market hours

as 9:30 a.m. through 4:00 p.m. ET. The extended

hour trading session currently takes place between

4:00 p.m. and 6:30 p.m. ET.

7See NASD Rules 4632, 4642, 4652, and 6620.

8 15 U.S.C. 78o–3(b)(6).

9 Id.

have been prepared by Nasdaq. On

September 19, 2000, Nasdaq submitted

Amendment No. 1 to the proposed rule

change.3 Nasdaq has filed the proposed

pursuant to Section 19(b)(3)(A) of the

Act 4 and Rule 19b–4(f)(b) thereunder, 5

which renders the rule effective upon

filing with the Commission. 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

Nasdaq proposes to amend NASD

Rule 6420, the transaction reporting rule

for over-the-counter (‘‘OTC’’) trades in

listed securities. The purpose of this

amendment is to require members to

append a ‘‘.T’’ modifier to Nasdaq

InterMarket transactions in listed

securities executed between 4:00 p.m.

and 6:30 p.m. Eastern Time (‘‘ET’’). The

text of the proposed rule change

follows. Proposed new language is

underlined; deleted language is

bracketed.

* * * * *

6400. REPORTING TRANSACTIONS IN

LISTED SECURITIES

6420. Transaction Reporting

(a) When and How Transactions are

Reported.

(1) Registered Reporting Members shall

transmit through ACT, within 90 seconds

after execution, last sale reports of

transactions in eligible securities executed

during the trading hours of the Consolidated

Tape otherwise than on a national securities

exchange. Transactions not reported within

90 seconds after execution shall be

designated as late and such trade reports

must include the time of execution.

Registered Reporting Members shall also

transmit through ACT, within 90 seconds

after execution, last sale reports of

transactions in eligible securities executed in

the United States otherwise than on a

national securities exchange between 4:00

p.m. and 6:30 p.m. Eastern Time [.]; trades

executed and reported after 4:00 p.m. Eastern

Time shall be designated as ‘‘.T’’ trades to

denote their execution outside normal

market hours. Transactions not reported

within 90 seconds after execution [shall be

designated as late and such trade reports]

must include the time of execution on the

trade report.

(2)

(A) Non-Registered Reporting Members

shall, within 90 seconds after execution,

transmit through ACT or the ACT Service

Desk (if qualified pursuant to Rule 7010(i)),

or if ACT is unavailable due to system or

transmission failure by telephone to the

Nasdaq Market Operations Department, last

sale reports of transactions in eligible

securities executed during the trading hours

of the Consolidated Tape otherwise than on

a national securities exchange.

(B) Non-registered Reporting Members

shall, within 90 seconds after execution,

transmit through ACT or the ACT Service

Desk (if qualified pursuant to Rule 7010(i)),

of if ACT is unavailable due to system or

transmission failure, by telephone to the

Nasdaq Market Operations Department, last

sale reports of transactions in eligible

securities exeucted in the United States

otherwise than on a national securities

exchange between the hours of 4:00 p.m. and

6:30 p.m. Eastern Time[.]; trades executed

and reported after 4:00 p.m. Eastern Time

shall be designated as ‘‘.T’’ trades to denote

their execution outside normal market hours.

Transactions not reported within 90 seconds

after execution [shall be designated as late

and such trade reports] must include the time

of execution on the trade report.

(3) to (6) 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,

Nasdaq 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. Nasdaq 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

In its June 2000 Special Study:

Electronic Communication Networks

and After-Hours Trading, the SEC’s

Division of Market Regulation stated

that U.S. equity markets should take the

necessary steps to preserve regular

trading session closing prices that are

distinct from prices at which equity

securities trade in the after-hours

trading session.6 For Nasdaq securities

and non-Nasdaq OTC equity securities,

this is accomplished by requiring firms

to use a special ‘‘.T’’ modifier on trade

reports transmitted through Nasdaq’s

Automated Confirmation Transaction

Service (‘‘ACT’’) outside normal market

hours.7 Trades in Nasdaq and nonNasdaq OTC securities that occur

outside normal market hours are

counted into the current day’s trading

volume, but do not affect the security’s

daily high, low, or last sale price, and

do not affect Index calculations or

mutual fund net asset values.

NASD members trading securities

listed on the New York Stock Exchange

(‘‘NYSE’’), the American Stock

Exchange (‘‘Amex’’), or the regional

exchanges in the Nasdaq InterMarket are

not currently required to use a ‘‘.T’’

modifier for trades that occur outside

normal market hours. As a result,

extended trading hour session

InterMarket trades are treated the same

as regular session trades and are used to

calculate NYSE and Amex closing

prices. This has resulted in corporate

and investor confusion over stock

pricing.

In order to address this issue, and

provide for consistency in the use of the

‘‘.T’’ modifier, Nasdaq proposes to

require NASD members to follow the

same ‘‘.T’’ reporting rules for listed

equities as they use for Nasdaq and OTC

equity securities during the extended

hour trading session. This will be

accomplished by amending the

Transaction Report Rules for trades in

listed securities to require members to

designate as ‘‘.T’’ transactions executed

and reported to ACT after 4:00 p.m. ET

to denote their execution outside

normal market hours. As with Nasdaq

and non-Nasdaq OTC securities, firms

must report late trades during this time

period with the ‘‘.T’’ modifier and the

execution time because ACT does not

allow firms to enter two modifiers (i.e.,

a firm cannot include both ‘‘.T’’ and

‘‘.SLD’’ on a trade report to denote both

an extended hour trading session trade

and a late trade). Inclusion of the time

of execution on the ‘‘.T’’ trade report

indicates a late trade occurring outside

normal market hours.

2. Basis

Nasdaq believes that the proposed

rule change is consistent with the

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

Act 8 because it will result in more

accurate and reliable information

regarding last sale transaction reports.

Section 15A(b)(6) of the Act 9 requires

that the rules of a registered securities

association be designed to prevent

fraudulent and manipulative acts and

58592 Federal Register / Vol. 65, No. 190 / Friday, September 29, 2000 / Notices

10 15 U.S.C. 78s(b)(3)(A).

11 17 CFR 240.19b-4(f)(6).

12 15 U.S.C. 78s(b)(3)(A).

13 17 CFR 240.19b-4(f)(6).

14See letter from Mary N. Revell, Assistant

General Counsel, Nasdaq, to Alton Harvey, Office

Chief, Division of Market Regulation, SEC, dated

September 6, 2000. 15 17 CFR 200.30–3(a)(12).

practices, to promote just and equitable

principles of trade, to foster cooperation

and coordination with persons engaged

in regulating, 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, and not be designed to

permit unfair discrimination between

customers, issuers, brokers, or dealers.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Nasdaq 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.

II. Date of Effectiveness of the Proposed

Rule Change and Timing for

Commission Action

Because the foregoing proposed rule

change does not significantly affect the

protection of investors or the public

interest; impose any significant burden

on competition; and become operative

for 30 days from the date on which it

was filed, or such shorter time as the

Commission may designate, it has

become effective pursuant to Section

19(b)(3)(A) of the Act 10 and Rule 19b–

4(f)(6) 11 thereunder. At any time within

60 days of the filing of a rule change

pursuant to Section 19(b)(3)(A) of the

Act,12 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.

A proposed rule change filed under

Rule 19b–4(f)(6) 13 normally does not

become operative prior to 30 days after

the date of filing. However, Rule 19b–

4(f)(6)(iii) permits the Commission to

designate a shorter time if such action

is consistent with the protection of

investors and the public interest.

Nasdaq seeks to have the proposed rule

change become operative on or before

September 21, 2000.14

The Commission, consistent with the

protection of investors and the public

interest, has determined to make the

proposed rule change operative on

September 21, 2000. The Commission

notes that the use of the ‘‘.T’’ modifier

proposed by Nasdaq is intended to help

clarify those trades in listed securities

that are executed after normal trading

hours similar to that which is used in

Nasdaq issues and OTC equity issues.

The Commission believes that extending

the use of ‘‘.T’’ to trades executed in

listed securities during extended hours

trading should provide consistency of

after hours trade reporting, which

should help to quell corporate and

investor confusion over the closing

prices of listed securities as determined

at the close of normal market hours.

Based on these reasons, the

Commission believes that it is

consistent with the protection of

investors and the public interest that the

proposed rule change be operative on

September 21, 2000. At any time within

60 days of the filing of the proposed rule

change, the Commission may summarily

abrogate such 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 person are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549–0609. 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–00–54 and should be

submitted by October 20, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–25026 Filed 9–28–00; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3290; Amendment

#1]

State of Montana

In accordance with a notice from the

Federal Emergency Management

Agency, dated September 19, 2000, the

above-numbered Declaration is hereby

amended to include the following

counties and Indian Reservations in the

State of Montana as a disaster area due

to damages caused by wildfires

beginning on July 13, 2000 and

continuing: Big Horn, Blaine, Carter,

Chouteau, Custer, Fallon, Fergus,

Garfield, Golden Valley, Hill, Liberty,

Musselshell, Petroleum, Phillips,

Powder River, Prairie, Rosebud, Toole,

Treasure, and Yellowstone Counties,

and Fort Belknap, Rocky Boy’s, Crow,

and Northern Cheyenne Indian

Reservations.

In addition, applications for economic

injury loans from small businesses

located in the following contiguous

counties may be filed until the specified

date at the previously designated

location: Dawson, McCone, Valley, and

Wibaux Counties in Montana; Campbell,

Crook, and Sheridan Counties in

Wyoming; Bowman, Golden Valley, and

Slope Counties in North Dakota; and

Butte and Harding Counties in South

Dakota. Any counties contiguous to the

above-named primary counties and not

listed herein have been previously

declared.

The economic injury number for the

State of North Dakota is 9I8800 and for

South Dakota the number is 9I8900.

All other information remains the

same, i.e., the deadline for filing

applications for physical damage is

October 29, 2000 and for economic

injury the deadline is May 30, 2001.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008.)

Dated: September 21, 2000.

Herbert L. Mitchell,

Acting Associate Administrator for Disaster

Assistance.

[FR Doc. 00–24958 Filed 9–28–00; 8:45 am]

BILLING CODE 8025–01–P