[Federal Register Volume 65, Number 199 (Friday, October 13, 2000)]
[Notices]
[Pages 61012-61014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-26281]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43417; File No. SR-NASD-00-16]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Notice of Filing and Order Granting Accelerated Approval of 
Amendment No. 3 to Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Amendments to Minimum Listing 
Requirements for the Inclusion and Maintenance of Open and Closed-End 
Funds in Nasdaq's Mutual Fund Quotation Service

October 5, 2000.

I. Introduction

    On April 4, 2000, the National Association of Securities Dealers, 
Inc. (``NASD'') through its wholly owned subsidiary The Nasdaq Stock 
Market, Inc. (``Nasdaq'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change relating to amendments to the 
minimum listing requirements for the inclusion and maintenance of open 
and closed-end funds in Nasdaq's Mutual Fund Quotation Service 
(``MFQS'' or ``Service'').\3\ On May 16, 2000, the Nasdaq submitted 
Amendment No. 2 to the proposed rule change.\4\ The proposed rule 
change was published in the Federal Register on June 5, 2000.\5\ On 
September 29, 2000, the Nasdaq submitted Amendment No. 3 to the 
proposed rule change.\6\ No comments were received on the proposal. 
This order approves the proposed rule change, as amended. Also, 
Amendment No. 3 is approved on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The NASD filed its proposed rule change on March 31, 2000. 
On April 4, 2000, the NASD filed Amendment No. 1 that entirely 
replaced the original rule filing.
    \4\ See Letter from Rober E. Aber, General Counsel and Senior 
Vice President, Nasdaq, to Katherine A. England, Assistant Director, 
Division of Market Regulation (``Division''), Commission (May 16, 
2000). Amendment No. 2 corrected a typographical error that appeared 
in the proposed rule language and clarified that the Mutual Fund 
Quotation Service includes only 73.8% of the total open-end and 
closed-end fund population.
    \5\ Securities Exchange Act Release No. 42831 (May 25, 2000), 65 
FR 35693.
    \6\ See Letter from Edward S. Knight, General Counsel and Senior 
Vice President, Nasdaq, to Katherine A. England, Assistant Director, 
Division, Commission (September 29, 2000). Amendment No. 3 amended 
the language of proposed NASD Rule 6800(d)(3) to replace the phrase 
``investment management firm managing the fund'' with ``investment 
adviser'' and make other technical corrections.
---------------------------------------------------------------------------

II. Description of the Proposal

    Nasdaq proposes to amend NASD Rule 6800 regarding the minimum 
listing requirements for the inclusion and maintenance of open and 
closed-end funds in Nasdaq's Mutual Fund Quotation Service (``MFQS''). 
Proposed new language is in italics; proposed deletions are in 
brackets.
* * * * *

6800. MUTUAL FUND QUOTATION SERVICE

    (a)-(b) No Change.
    (c) News Media Lists.
    (1)(A) An eligible open end fund shall be authorized for 
inclusion in the News Media List released by the Association if it 
has at least 1,000 shareholders or $25 million in net assets.
    (B) An eligible closed-end fund shall be authorized for 
inclusion in the News Media List released by the Association if it 
has at least $60 [100] million in net assets.
    (C) Compliance with subparagraphs (1)(A) and (B) shall be 
certified by the fund to the Association at the time of initial 
application for inclusion in the List.

[[Page 61013]]

    (2)(A) An authorized open-end fund shall remain included in the 
New Media List if it has either 750 shareholders or $15 million in 
net assets.
    (B) An authorized closed-end fund shall remain included in the 
News Media List if it has $30 [60] million in net assets.
    (C) Compliance with subparagraphs (2)(A) and (B) shall be 
certified to the Association upon written request by the 
Association.
    (d) Supplemental List.
    An eligible open-end or closed-end fund shall be authorized for 
inclusion in the Supplemental List released to vendors of Nasdaq 
Level 1 Service if it meets one of the criteria set out in 
subparagraph (1), subparagraph (2), or subparagraph (3) below:
    (1) The fund has net assets of $10 million or more; or
    (2) The fund has had two full years of operation; or
    (3) The fund's investment adviser:
    (A) Is the investment adviser of at least one other fund that is 
listed on the Mutual Fund Quotation Service and that has net assets 
of $10 million or more; and
    (B) Has at least $15 million in total assets of open-end and 
closed-end funds under management.
    (e) No Change.
* * * * *
    The MFQS was created to collect daily price and related data for 
mutual funds and money market funds and to disseminate that information 
to the news media and market data vendors.\7\ Currently, the MFQS 
disseminates the valuation data for over 11,000 funds. This information 
dissemination process is facilitated by the use of web browser-based 
technology, which enables funds included in the Service, or the pricing 
agents designated by such funds, to transmit directly to Nasdaq a 
multitude of pricing information, including information about a fund's 
net asset value, offer price, and closing market price.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 22264 (July 23, 
1985), 50 FR 30899 (July 29, 1985).
---------------------------------------------------------------------------

    Funds must meet minimum eligibility criteria in order to be 
included in the MFQS.\8\ The MFQS has two ``lists'' in which a fund may 
be included--the News Media List and the supplemental List--and each 
list has its own initial inclusion requirements.\9\ The News Media List 
also has maintenance/continued inclusion requirements. If a fund 
qualifies for the News Media List, pricing information about the fund 
is eligible for inclusion in the fund tables of newspapers and is also 
eligible for dissemination over Nasdaq's Level 1 Service, which is 
distributed by market data vendors.\10\ If a fund qualifies for the 
Supplemental List, the pricing information about that fund generally is 
not included in newspaper fund tables, but is disseminated over 
Nasdaq's Level 1 Service. The Supplemental List thus provides 
significant visibility for funds that do not otherwise qualify for 
inclusion in the News Media List. Each fund incurs an annual fee for 
inclusion in the Service.\11\
---------------------------------------------------------------------------

    \8\ See NASD Rule 6800.
    \9\ See id.
    \10\ See NASD Rule 7010.
    \11\ See NASD Rule 7090.
---------------------------------------------------------------------------

    Nasdaq proposes to amend the MFQS inclusion criteria for both the 
Supplemental and News Media List by expanding the universe of funds 
that are eligible for inclusion in the Service. The proposal lowers 
both the initial and maintenance requirements for closed-end funds to 
participate in the News Media List. Currently, in order to qualify 
initially for inclusion in the News Media List, a closed-end fund must 
have at least $100 million in net assets. To remain in the News Media 
List, a closed-end fund must maintain at least $60 million in net 
assets. The proposal would lower the net asset requirement for a 
closed-end fund to qualify initially for inclusion in the News Media 
List to at least $60 million in net assets. The net asset requirement 
for a closed-end fund to remain included in the News Media List would 
be lowered to at least $30 million.
    Nasdaq also proposes to amend the inclusion criteria for the 
Supplemental List by providing an alternative means for a fund to be 
included in the Service. Under this alternative, a fund would qualify 
for the MFQS if the investment adviser is the investment adviser of at 
least one other fund listed on MFQS that has $10 million in net assets. 
In addition, the firm must have at least $15 million from open-end and 
closed-end funds under management. Nasdaq notes that manages assets 
from other sources--such as pension funds--would not be included for 
purposes of determining whether the investment firm meets the 
requirement that it manage at least $15 million in fund-related assets.

III. Decision

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities association,\12\ and in 
particular, the requirements of Section 15A(b)(6) \13\ of the Act, 
because it is designed to foster cooperation and coordination with 
persons engaged in processing information with respect to 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.
---------------------------------------------------------------------------

    \12\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    The Commission believes that the proposal will protest investors 
and the public interest by promoting better processing of fund pricing 
information. Specifically, the Commission notes that in Section 
11A(a)(1)(C),\14\ Congress found that it is in the public interest and 
appropriate for the protection of investors and the maintenance of fair 
and orderly markets to assure the availability to brokers, dealers, and 
investors of information with respect to quotations and transactions in 
securities. The Commission also believes that the proposed new listing 
criteria will provide greater transparency to the markets by providing 
pricing information for a broader base of funds for which there is 
significant investor interest. Further, by providing listed status to 
investment companies with a sufficient investor base and trading 
interest, the proposed new listing standards will continue to serve as 
a means for the marketplace to screen issuers and maintain fair and 
orderly markets.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78k-1(a)(1)(C).
---------------------------------------------------------------------------

    The Commission also finds good cause for approving proposed 
Amendment No. 3 prior to the thirtieth day after the date of 
publication of notice of filing thereof in the Federal Register. 
Proposed Amendment No. 3 provides clarity to the rule.\15\ It replaces 
the term ``investment management firm and managing the fund'' in NASD 
Rule 6800(d)(3) with ``investment adviser,'' a term which is defined in 
the Investment Advisers Act of 1940.\16\
---------------------------------------------------------------------------

    \15\ See supra n. 6.
    \16\ 15 U.S.C. 80b-2(a)(11).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 3. 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 other person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be

[[Page 61014]]

available for inspection and copying at the Commission's Public 
Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the Association. All 
submissions should refer to the File No. SR-NASD-00-16 and should be 
submitted by November 3, 2000.

V. Conclusion

    For the reasons discussed above, the Commission finds that the 
proposal is consistent with the Act and the rules and regulations 
thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change, SR-NASD-00-16, as amended, be 
and hereby is approved.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-26281 Filed 10-12-00; 8:45 am]
BILLING CODE 8010-01-M