Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Notices 14953

35 17 CFR 200.30–3(a)(12).

1A buy stop order is an order to buy which

becomes a market order when a transaction takes

place at or above the stop price. Conversely, a sell

stop order is an order to sell which becomes a

market order when a transaction takes place at or

below the stop price.

2Under NASD Rule 6410(d), ‘‘eligible securities’’

means all common stocks, preferred stocks, longterm warrants, and rights entitling the holder to

acquire an eligible security, listed or admitted to

unlisted trading privileges on the American Stock

Exchange (‘‘Amex’’) or the New York Stock

Exchange (‘‘NYSE’’), and securities listed on the

regional stocks exchanges which substantially meet

the original listing requirements of the Amex or the

NYSE.

3A buy stock limit order is an order to buy that

becomes a limit order at the limit price when a

transaction occurs at the stop price. Conversely, a

sell stop limit order is an order to sell that becomes

a limit order at the limit price when a transaction

occurs at the stop price.

Anyone using SOES, whether a market

maker displaying its own quotes or a

customer limit order, or an order entry

firm, who effects a transaction will have

to pay $0.50 per order. The cost of using

SOES will be the same for all users.

The Commission also finds the

institution of a charge of $0.25 for each

cancellation entered into SOES and

SelectNet to be consistent with the Act.

The broadcast of orders that are

subsequently cancelled creates the need

for increased system capacity in order to

ensure the smooth and efficient

operation of SOES and SelectNet. The

Commission finds that the $0.25 fee

imposes a portion of the cost of

maintaining system capacity to handle

large numbers of cancellations to those

firms that create the need for such

capacity. The Commission finds that the

cancellation fee does not impose a

burden on competition not necessary or

appropriate in furtherance of the Act.

All users of the two systems will bear

the same cost for cancellation of orders.

IV. Conclusion

It is therefore ordered, pursuant to

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

proposed rule change (SR–NASD–96–

48) be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.35

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7871 Filed 3–27–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38429; File No. SR–NASD–

97–20]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to the

Elimination of the Prohibitions Against

NASD Members Accepting Stop Orders

and Stop Limit Orders in ExchangeListed Securities

March 21, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on March 10, 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, II, and III below, which Items

have been prepared by the NASD. 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

Currently, paragraph (i)(1) of NASD

Rule 6440, ‘‘Trading Practices,’’

prohibits NASD members from

accepting stop orders 1 in eligible

securities.2 NASD Rule 6440(i)(2)

currently allows members to accept stop

limit orders 3 in eligible securities where

the stop price and the limit price are the

same. The NASD proposes to amend

NASD Rule 6440(i) to: (1) Allow

members to accept stop orders in

eligible securities; and (2) eliminate the

requirement that the stop price must

equal the limit price in order for a

member to accept a stop limit order in

an eligible security. Below is the text of

the proposed rule change. Additions are

italicized; deletions are bracketed.

NASD Rule 6440

(a)–(h). No change.

(i) (1) A [No] member [shall] may, but

is not obligated to, accept a stop order

in an eligible security.

(A) A buy stop order is an order to

buy which becomes a market order

when a transaction takes place at or

above the stop price.

(B) A sell stop order is an order to sell

which becomes a market order when a

transaction takes place at or below the

stop price.

(2) A member[s] may, but is not

obligated to, accept stop limit orders in

eligible securities [where the stop price

and the limit price are the same]. When

transactions occur at the stop price, the

order to buy or sell becomes a limit

order at the stop price.

(j) 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, 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 changes. 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 amend NASD

Rule 6440 to eliminate current

restrictions on the ability of NASD

members to accept stop orders and

certain stop limit orders in eligible

securities. Currently, NASD Rule

6440(i)(1) provides that no NASD

member shall accept a stop order in an

eligible security; NASD Rule 6440(i)(2)

provides that no NASD member shall

accept a stop limit order in an eligible

security unless the stop price and the

limit price are the same. Under the

proposed rule change, NASD members

will be allowed to accept stop orders in

eligible securities and stop limit orders

where the stop price and the limit price

are not the same. The proposal also

clarifies that NASD members are not

obligated to accept stop orders or stop

limit orders.

The NASD believes there is no

economic or regulatory reason to

preclude or restrict investors from

placing stop orders or stop limit orders

in eligible securities. In this connection,

the NASD notes that there are no

comparable restrictions on the

placement of these types of orders in

securities listed on The Nasdaq Stock

Market (‘‘Nasdaq’’). Just as investors in

Nasdaq securities are able to receive the

protections and benefits that result from

placing stop orders and stop limit

orders, the NASD believes that investors

in the third market should be able to

receive the same benefits and

protections from placing these types of

orders. In particular, through the

placement of stop orders and stop limit

orders, the NASD believes that investors

will be better able to implement their

investment strategies and manage their

portfolios. Accordingly, the NASD

believes its proposal will enhance the

protection of investors and the integrity

of the market.
14954 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Notices

4 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries submitted by NSCC.

3For a complete description of NSCC’s Fund/

SERV, Networking, and Mutual Fund Commission

Services, refer to Securities Exchange Act Release

Nos. 31937 (March 1, 1993), 58 FR 12609 [File No.

SR–NSCC–92–14] (order approving proposed rule

change regarding Fund/SERV system); 26376

(December 20, 1988), 53 FR 52546 [File No. SR–

NSCC–88–08] (order approving Networking); and

31579 (December 17, 1992), 57 FR 60018 [File No.

SR–NSCC–92–13] (order approving the Mutual

Fund Commissions Settlement System and

consolidating the Mutual Fund Commissions

Settlement, Fund/SERV, and Networking Systems

under NSCC’s Mutual Fund Services.

The NASD believes that the proposed

rule change is consistent with Section

15A(b)(6) of the Act. Among other

things, Section 15A(b)(6) requires 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 foster cooperation

and coordination with persons engaged

in regulating, clearing, 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. In

particular, as noted above, because the

NASD believes the proposed rule

change will better enable investors to

implement their investment strategies

and manage the risks associated with

their portfolios, the NASD believes the

proposal will enhance the protection of

investors.

(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

Statements on Comments on the

Proposed Rule Changes Received From

Members, Participants or Others

Comments were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Changes 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 reason for so finding or (ii)

as to which the self-regulatory

organization 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.

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

Section, 450 Fifth Street, NW.,

Washington, DC. Copies of such filing

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organization. All submissions should

refer to file number SR–NASD–97–20

and should be submitted by April 18,

1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7873 Filed 3–27–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38428; File No. SR–NSCC–

97–02]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing of a

Proposed Rule Change To Modify

NSCC’s Rules To Permit Unit

Investment Trusts To Be Processed

Through Fund/SERV, Networking, and

Mutual Fund Commission Settlement

Services

March 21, 1997.

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

Securities Exchange Act of 1934

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

February 10, 1997, the National

Securities Clearing Corporation

(‘‘NSCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

the proposed rule change (File No. SR–

NSCC–97–02) as described in Items I, II,

and III below, which items have been

prepared primarily by NSCC. 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

The proposed rule change consists of

modifications to NSCC’s rules in order

to permit unit investment trusts

(‘‘UITs’’) to be processed through

NSCC’s Fund/SERV, Networking, and

Mutual Fund Commission Settlement

Services, which collectively constitute

NSCC’s Mutual Fund Services.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NSCC 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. NSCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

A group of NSCC participants, bank

trustees, and industry organizations

such as the Securities Industry

Association’s Securities Operation

Division, the Regional Municipal

Operations Association, and National

Unit Trust Association have requested

that NSCC permit UITs to be eligible for

processing through its Fund/SERV,

Networking, and Mutual Fund

Commission Settlement Services.3 Such

eligibility will allow broker-dealers that

are Mutual Fund Services only members

(i.e., primarily bank broker-dealers and

insurance company subsidiaries) and

therefore, that are not permitted to

process these transactions through

NSCC’s continuous net settlement

(‘‘CNS’’) system to process UIT trades

through the Fund/SERV, Networking,

and Mutual Fund Commission

Settlement systems. Currently, UITs are

eligible for NSCC processing through

NSCC’s CNS system only. However,

because Mutual Fund Services only

members are not permitted access to

NSCC’s CNS system, they must settle

UIT trades ex-clearing with their UIT