59036 Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices

5 17 CFR 240.11Aa3–2.

6 17 CFR 200.30–3(a)(29).

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

2 17 CFR 240.19b–4.

3See August 2, 2000 letter from Kathleen A.

O’Mara, Assistant General Counsel, NASD

Regulation to Katherine A. England, Assistant

Director, Division of Market Regulation, SEC

(‘‘Amendment No. 1’’). Amendment No. 1

broadened the scope of the proposed rule change.

concerned with these categories of costs.

Because OPRA, as an administrative

committee of exchanges, does not

account for any assets of its own, it does

not capitalize any of its costs but

instead, simply passes them on to the

exchanges. However, OPRA believes

that the concept of capitalized costs is

an appropriate factor to be taken into

account in determining what should be

a proper participation fee. Accordingly,

the first factor proposed to be included

in the Plan for this purpose is to

consider what would have been

amortized as OPRA’s capital

expenditures over the past five years if

OPRA were subject to generally

accepted accounting principles. OPRA

believes that five years is an appropriate

time frame for this purpose not only

because it represents a reasonable life

for the kinds of computer hardware and

software assets that make up the OPRA

system, but also because it is a short

enough period to provide a reasonable

basis for determining how much of

OPRA’s past expenses should be shared

by a new party.

The next factor proposed to be

considered is an assessment of costs

incurred and to be incurred by OPRA in

connection with any modifications to

the OPRA system necessary to

accommodate the new party, unless

these costs have otherwise been paid or

reimbursed by the new party. This, too,

is a cost-based factor, and reflects that

it is appropriate for a new party to pay

the costs uniquely associated with its

becoming a party.

Finally, OPRA proposes that the

determination of the participation fee

would also take into account previous

fees paid by other new parties. Of

course, the closer in time any such prior

fees were paid and the greater the

similarity of the circumstances between

the participation of the other parties and

the party that is to pay the participation

fee under consideration, the greater will

be the weight given to this factor, in the

interest of fairness and consistency.

Although the participation fee to be

paid by ISE will not be payable unless

and until specific standards for

determining the fee have been approved

by the Commission, ISE and the other

parties have had discussions concerning

what would be the amount of the fee if

the standards proposed in this

amendment were approved, and they

have reached agreement on both the

amount of the fee and the terms of

payment.

II. Implementation of the Plan

Amendment

OPRA intends to make the proposed

amendment to the Plan reflected in this

filing effective immediately upon the

approval of the amendment by the

Commission pursuant to Rule 11Aa3–2

under the Act.5

III. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed Plan

amendment 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, and all written statements

with respect to the proposed Plan

amendment that are filed with the

Commission, and all written

communications relating to the

proposed Plan amendment between the

Commission and any person, other than

those 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 the filing also will be available

at the principal offices of OPRA. All

submissions should refer to File No.

SR–OPRA–00–08 and should be

submitted by October 24, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–25294 Filed 10–2–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43346; File No. SR–NASD–

00–33]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 by the National

Association of Securities Dealers, Inc.

to Amend NASD Rule 3340 to Prohibit

Publication of Quotations or

Indications of Interest in a Security

During a Trading Halt

September 26, 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 June 7,

2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its wholly

owned subsidiary, NASD Regulation,

Inc. (‘‘NASD Regulation’’), filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by NASD Regulation. On

August 2, 2000, NASD Regulation

amended the proposal.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

change, as amended, from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation proposes to amend

NASD Rule 3340 to prohibit the

publication by members of quotations or

indications of interest for a security

during a trading halt. The text of the

proposed rule change is below.

Proposed new language is in italics.

Proposed deletions are in brackets.

3340. Prohibition on Transactions,

Publication of Quotations, or

Publication of Indications of Interest

During Trading Halts

No member or person associated with

a member shall, directly or indirectly,

effect any transaction or publish a

quotation, a priced bid and/or offer, an

unpriced indication of interest

(including ‘‘bid wanted’’ and ‘‘offer

wanted’’ and name only indications), or

a bid or offer, accompanied by a

modifier to reflect unsolicited customer

interest, in [a] any security as to which

a trading halt is currently in effect.

* * * * *

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 IV below.

NASD Regulation has prepared

summaries, set forth in sections A, B,

and C below, of the most significant

aspects of such statements.

Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices 59037

4The Commission may impose trading

suspensions in the United States securities markets

under Section 12(k) of the Act. See 15 U.S.C. 781(k).

NASD Rule 4120 provides that Nasdaq may halt

trading: (1) in the over-the-counter market of a

security listed on Nasdaq to permit the

dissemination of material news; or (2) in the overthe-counter market of a security listed on a national

securities exchange during a trading halt imposed

by such exchange to permit the dissemination of

material news; or (3) by (i) Consolidated Quotation

System (‘‘CQS’’) market makers in a CQS security

because of an order imbalance or influx

(‘‘operational trade halt’’); or (ii) Nasdaq market

makers in a security listed on Nasdaq, when the

security is a derivative or component of a CQS

security and a national securities exchange imposes

an operational trading halt in that CQS security; or

(4) in an American Depository Receipt (‘‘ADR’’) or

other security listed on Nasdaq, when the Nasdaqlisted security or the security underlying the ADR

is listed on or registered with a national or foreign

securities exchange or market, and the national or

foreign securities exchange or market, or regulatory

authority overseeing such exchange or market, halts

trading in such security for regulatory reasons; or

(5) in a security listed on Nasdaq when Nasdaq

requests from the issuer information relating to: (i)

material news; (ii) the issuer’s ability to meet

Nasdaq listing qualification requirements, as set

forth in NASD Rule 4300 and 4400 Series; or (iii)

any other information which is necessary to protect

investors and the public interest. See also Securities

Exchange Act Release No. 42806 (May 22, 2000), 65

FR 34518 (May 30, 2000) (SR–NASD–99–33), which

establishes Nasdaq’s trade and quote halt authority

in certain specific circumstances in securities

included in the OTC Bulletin Board Service

(‘‘OTCBB’’), and Notice to Members 99–69 soliciting

comments on whether NASD Regulation should

have authority to halt trading in non-Nasdaq, nonOTCBB, over-the-counter securities under certain

circumstances.

5NASD Rule 3310 states that: [n]o member shall

publish or circulate, or cause to be published or

circulated, any notice, circular, advertisement,

newspaper article, investment service, or

communication of any kind which purports . . . to

quote the bid price or asked price for any security,

unless such member believes that such quotation

represents a bona fide bid for, or offer of, such

security * * *.

NASD Rule IM–3310 states, among other things,

that: [i]t would be inconsistent with the above

provisions for a member, for itself or for any other

person, to publish or circulate or to cause to be

published or circulated, by any means whatsoever,

any quotation for any security without having

reasonable cause to believe that such quotation is

a bona fide quotation, is not fictitious and is not

published or circulated or caused to be published

or circulated for any fraudulent, deceptive or

manipulative purpose. IM–3310 also provides:

‘‘[f]or the purposes of this interpretation, the term

‘quotation’ shall include any bid or offer or any

formula, such as ‘bid wanted’ or ‘offer wanted,’

designed to induce any person to make or submit

any bid or offer.’’

6NASD Rule 3320 (‘‘Firm Quote Rule’’) states

that: [n]o member shall make an offer to buy from

or sell to any person any security at a stated price

unless such member is prepared to purchase or sell,

as the case may be, at such price and under such

conditions as are stated at the time of such offer to

buy or sell.

7 15 U.S.C. 78o–3(b)(6).

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The purpose of the proposed rule

change is to expressly prohibit members

from publishing quotations or

indications of interest in a security

during a trading halt. Currently, NASD

Rule 3340 prohibits members from

effecting a transaction in a security

during a trading halt, but does not

expressly state that members are

prohibited from publishing quotations

or indications of interest.4 However,

NASD Rules 3310 5 and 3320,6

respectively, state that members are

required to enter only bona fide

quotations and honor such quotations if

presented with an order. Thus, if during

a trading halt, a member that is

publishing a quotation for a security is

presented with a liability order for such

security, the member would be faced

with the choice of either honoring its

quote and violating the rule prohibiting

transactions in a security during a

trading halt, or complying with the

trading halt rule but violating the Firm

Quote Rule. In addition, the entry of

quotations or indications of interest

while there is a trading halt in a security

could be potentially misleading. To

prevent this from happening, NASD

Regulation is proposing that NASD Rule

3340 be amended to expressly state that

members are prohibited from publishing

quotations or indications of interest

during a trading halt.

2. Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

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

the Act,7 which requires, among other

things, that the Association’s rules must

be designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, and, in general, to protect

investors and the public interest. The

NASD believes that, under the proposed

rule change, preventing the publication

of quotations or indications of interest

during a trading halt will prevent

members from seeking to trade at a time

when they cannot execute a trade. Thus,

the proposal is designed to protect

investors and to insure the integrity of

quotations by preventing fictitious or

misleading quotations.

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. 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

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,

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 number

SR–NASD–00–33 and should be

submitted by October 24, 2000.

59038 Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices

8 17 CFR 2000.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Alden S. Adkins, Senior Vice

President and General Counsel, NASD Regulation,

to Katherine A. England, Assistant Director,

Division of Market Regulation, Commission, dated

September 5, 2000 (‘‘Amendment No. 1’’).

Amendment No. 1 proposed substantive changes to

the proposed rule language, including the definition

of the time of receipt for manual block orders of

10,000 shares or greater, and the provisions for

exemptive relief.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority. 8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–25295 Filed 10–2–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43344; File No. SR–NASD–

00–23]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 by the National

Association of Securities Dealers, Inc.

Relating to Amendments to Order

Audit Trail System Rules

September 26, 2000.

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

Securities Exchange Act of 1934

(‘‘Exchange Act’’),1 and Rule 19b–4

thereunder,2 notice is hereby given that

on April 19, 2000, the National

Association of Securities Dealers, Inc.

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

wholly-owned subsidiary, NASD

Regulation, Inc. (‘‘NASD Regulation’’),

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 NASD

Regulation. On September 5, 2000,

NASD Regulation amended its

proposal.3 The Commission is

publishing this notice to solicit

comments on the proposed rule change,

as amended, from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation is proposing to

amend NASD Rules 6951, 6954, 6955

and 9610. The proposed rule change

would: (1) provide that the time of order

origination and receipt for an electronic

order is the time the order is captured

by a member’s electronic order-routing

or execution system; for a manual order

that is fewer than 10,000 shares, the

time of order origination and receipt is

the time the order is received by the

member’s trading desk or trading

department for execution or routing

purposes; and for a manual order that is

10,000 shares or greater, the time of

order origination and receipt is the time

the order is received by the member

from the customer; (2) exclude certain

members from the definition of

‘‘Reporting Member’’ for those orders

that meet specified conditions and are

recorded and reported to the Order

Audit Trail System (‘‘OATS’’) by

another member; (3) require any

receiving reporting member, including

electronic communications networks

(‘‘ECNs’’), that receive routed orders,

electronically or manually, to capture

and report a routed order identifier; and

(4) permit NASD Regulation to grant

exemptive relief from the OATS

reporting requirements to members that

meet specified criteria.

The text of the proposed rule change

follows. Proposed new rule language is

in italics; proposed deletions are in

brackets.

NASD Systems and Programs

6950. Order Audit Trail System

6951. Definitions

For purposes of Rules 6950 through 6957:

(a) through (m) No Change.

(n) ‘‘Reporting Member’’ shall mean a

member that receives or originates an order

and has an obligation to record and report

information under Rules 6954 and 6955. A

member shall not be considered a Reporting

Member in connection with an order, if the

following conditions are met:

(1) the member engages in nondiscretionary order routing process, pursuant

to which it immediately routes, by electronic

or other means, all of its orders to receiving

Reporting Member;

* * * * *

(2) the members does not direct and does

not maintain control over subsequent routing

or execution by the receiving Reporting

Member;

(3) the receiving Reporting Member records

and reports all information required under

Rules 6954 and 6955 with respect to the

orders; and

(4) the member has a written agreement

with the receiving Reporting Members

specifying the respective functions and

responsibilities of each part to affect full

compliance with the requirements of Rules

6954 and 6955.

* * * * *

6954. Recording of Order Information

(a) No Change.

(b) Order Origination and Receipt.

Unless otherwise indicated, the following

order information must be recorded under

this Rule when an order is received or

originated. For purpose of this Rule, the order

origination and receipt time for an electronic

order is the time the order is captured by a

member’s electronic order-routing or

execution system; for a manual order that is

fewer than 10,000 shares, the order

origination and receipt time is the time the

order is received by the member’s trading

desk or trading department for execution or

further routing purposes; and for a manual

order that is 10,000 shares or greater, the

order origination and receipt time is the time

the order is received by the member from the

customer.

(1) through (18) No Change.

(c) Order Transmittal.

Order information required to be recorded

under this Rule when an order is transmitted

includes the following.

(1) and (2) No Change.

(3) When a member electronically

transmits an order for execution on an

Electronic Communications Network:

(A) the transmitting Reporting Member and

shall record:

(i) the fact that the order was transmitted

to an Electronic Communications Network.

(ii) the order identifier assigned to the

order by the Reporting Member.

(iii) the maker participant symbol assigned

by the Association to the Reporting Member.

(iv) the market participant symbol assigned

by the Association to the member to which

the order is transmitted,

(v) the date the order was first originated

or received by the Reporting Member,

(vi) the date and time the order is

transmitted, and

(vii) the number of shares to which the

transmission applies; and

(B) the receiving Reporting Member

operating the Electronic Communications

Network shall record:

(i) the fact that the order was received by

an Electronic Communications Network,

(ii) the order identifier assigned to the

order by the member that transmits the order,

(iii) [(ii)] the market participant symbol

assigned by the Association to the

transmitting Reporting Member, and

(iv) [(iii)] other information items in Rule

6954(b) that apply with respect to such order,

which must include information items (1),

(2), (3), (6), (7), (8), (10), (11), (12), (13), (15),

and (16).

(4) When a member manually transmits an

order to another member, other than to an

Electronic Communications Network:

(A) the transmitting Reporting Member

shall record:

(i) the fact that the order was transmitted

manually,

(ii) the order identifier assigned to the

order by the Reporting Member,

(iii) the market participant symbol assigned

by the Association to the Reporting Member,

(iv) the market participant symbol assigned

by the Association to the member to which

the order is transmitted,

(v) the date the order was first originated

or received by the Reporting Member,

(vi) the date and time the order is

transmitted,

(vii) the number of shares to which the

transmission applies, and

(viii) for each order to be included in a

bunched order, the bunched order route

indicator assigned to the bunched order by

the Reporting Member; and

(B) the receiving Reporting Member shall

record, in addition to all other information