13416 Federal Register / Vol. 62, No. 54 / Thursday, March 20, 1997 / Notices

2The Commission notes that the phrase ‘‘inactive

organizations’’ includes both inactive members and

inactive member organizations that meet the

definition of ‘‘inactive organization’’ as noted in

footnote number 1. Phone conversation between

David Rusoff, Attorney, Foley & Lardner, and

Heather Seidel, Attorney, Market Regulation,

Commission, on March 7, 1997.

3This definition of ‘‘inactive organization’’ is the

same as the definition for the ‘‘inactive

organization’’ exemption from the Exchange’s

examination fee, section (p) under the CHX

Membership Dues and Fee Schedule. Phone

conversation between David Rusoff, Attorney, Foley

& Lardner, and Heather Seidel, Attorney, Market

Regulation, Commission, on March 7, 1997.

4 15 U.S.C. 78f(b)(4).

5 15 U.S.C. 78s(b)(3)(A).

6 17 CFR 240.19b–4(e)(2).

1 15 U.S.C. 78s(b)(1)(1988).

1 17 CFR 240.19b–4 (1991).

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 provide an exemption from

the Exchange’s SRO fee for certain

members. The Exchange’s SRO fee

applies to members and members

organizations and helps recoup costs

incurred by the Exchange in performing

its self-regulatory function. The

Exchange proposes to exempt inactive

organizations 2 from this fee because the

Exchange does not incur any significant

costs for regulating these firms.

An inactive organization is defined as

an organization that has no securities

transaction revenue, as initially

determined by its most recent annual

FOCUS report, so long as the

organization continues to have no such

revenue each month.3 For inactive

organizations which do not file FOCUS

reports with the Exchange, such as

when the CHX is not the Designated

Examining Authority for the firm, each

organization must still make such filings

with the Exchange to support its

contention that it is an inactive

organization. If appropriate

documentation is not received from the

organization, the Exchange will impose

the SRO fee.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b)(4) of the Act 4 in that it

provides for the equitable allocation of

reasonable dues, fees and other charges

among its members and issuers and

persons using its facilities.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe the

proposed rule change will impose any

burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

No written comments were solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change has become

effective upon filing pursuant to Section

19(b)(3)(A) of the Act 5 and

subparagraph (e)(2) of Rule 19b–4 6

thereunder, in that the proposal

establishes or changes a due, fee, or

other charge imposed by the Exchange.

At any time within 60 days of the filing

of such 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 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 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 Exchange. All

submissions should refer to File No.

SR–CHX–97–05 and should be

submitted by April 10, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7055 Filed 3–19–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38402; File No. SR–NASD–

97–19]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by National

Association of Securities Dealers, Inc.

Relating to Small Order Execution

System Tier Size Classifications

March 14, 1997.

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

Securities Exchange Act of 1934

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

notice is hereby given that on March 7,

1997, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) 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

The NASD is submitting this filing to

effectuate The Nasdaq Stock Market,

Inc.’s (‘‘Nasdaq’’) periodic

reclassification of Nasdaq National

Market (‘‘NNM’’) securities into

appropriate tier sizes for purposes of

determining the maximum size order for

a particular security eligible for

execution through Nasdaq’s Small Order

Execution System (‘‘SOES’’).

Specifically, under the proposal, 692

NNM securities will be reclassified into

a different SOES tier size effective April

1, 1997. Since the NASD’s proposal is

an interpretation of existing NASD

rules, there are no language changes.

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 change. 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.
Federal Register / Vol. 62, No. 54 / Thursday, March 20, 1997 / Notices 13417

3The classification criteria is set forth in NASD

Rule 4613(a)(2) and the footnote to NASD Rule

4710(g).

4NASD To Members 97–17 (March 1997).

5 15 U.S.C. 78o(b)(6).

6 Id.

7 15 U.S.C. 78s(b)(3)(A)(i).

8 17 CFR 240.19b–4(e).

9 15 U.S.C. 78s(b)(3)(A).

10 17 CFR 200.30–3(a)(12).

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the rule change is to

effectuate Nasdaq’s periodic

reclassification of NNM securities into

appropriate tier sizes for purposes of

determining the maximum size order for

a particular security eligible for

execution through SOES. Nasdaq

periodically reviews the SOES tier size

applicable to each NNM security to

determine if the trading characteristics

of the issue have changed so as to

warrant a tier size adjustment. Such a

review was conducted using data as of

December 31, 1996, pursuant to the

following established criteria: 3

NNM securities with an average daily nonblock volume of 3,000 shares or more a day,

a bid price less than or equal to $100, and

three or more market makers are subject to

a minimum quotation size requirement of

1,000 shares and a maximum SOES order

size of 1,000 shares;

NNM securities with an average daily nonblock volume of 1,000 shares or more a day,

a bid price less than or equal to $150, and

two or more market makers are subject to a

minimum quotation size requirement of 500

shares and a maximum SOES order size of

500 shares; and

NNM securities with an average daily nonblock volume of less than 1,000 shares a day,

a bid price less than or equal to $250, and

less than two market makers are subject to a

minimum quotation size requirement of 200

shares and a maximum SOES order size of

200 shares.

Pursuant to the application of this

classification criteria, 692 NNM

securities will be reclassified effective

April 1, 1997. These 692 NNM

securities are set out in the NASD’s

Notice To Members 97–17.4

In ranking NNM securities pursuant

to the established classification criteria,

Nasdaq followed the changes dictated

by the criteria with three exceptions.

First, an issue was not moved more than

one tier size level. For example, if an

issue was previously categorized in the

1,000-share tier size, it would not be

permitted to move to the 200-share tier

even if the reclassification criteria

showed that such a move was

warranted. In adopting this policy,

Nasdaq was attempting to maintain

adequate public investor access to the

market for issues in which the tier size

level decreased and help ensure the

ongoing participation of market makers

in SOES for issues in which the tier size

level increased. Second, for securities

priced below $1 where the reranking

called for a reduction in tier size, the

tier size was not reduced. Third, for the

top 50 Nasdaq securities based on

market capitalization, the SOES tier

sizes were not reduced regardless of

whether the reranking called for a tiersize reduction.

The NASD believes that the proposed

rule change is consistent with Section

15A(b)(6) of the Act.5 Section

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

that the rules of the NASD governing the

operation of Nasdaq be designed to

foster cooperation and coordination

with persons engaged in regulating,

clearing, settling, processing

information with respect to, and

facilitating transactions in securities,

and to remove impediments to and

perfect the mechanism of a free and

open market. The NASD believes that

the reassignment of NNM securities

within SOES tier size levels will further

these ends by providing an efficient

mechanism for small, retail investors to

execute their orders on Nasdaq and by

providing investors with the assurance

that they can effect trades up to a certain

size at the best prices quoted on Nasdaq.

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

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Comments were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change has become

effective immediately on March 7, 1997,

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

Act 7 and subparagraph (e) of Rule 19b–

4 8 thereunder, because the reranking of

NNM securities into appropriate SOES

tier sizes was done pursuant to the

NASD’s stated policy and practice with

respect to the administrative and

enforcement of two existing NASD

rules. Further, in the SOES Tier Size

Order, the Commission requested that

the NASD provide this information as

an interpretation of an existing NASD

rule under Section 19(b)(3)(A) of the

Act.9

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, 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 File No.

SR–NASD–97–19 and should be

submitted by April 10, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7048 Filed 3–19–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38399; File No. SR–NASD–

97–18]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change and Amendment No. 1 by

National Association of Securities

Dealers, Inc. Relating to Amendments

to the Corporate Financing Rule, The

Nasdaq Stock Market Rules, and Overthe-Counter Bulletin Board Rules to

Effect Compliance With SEC

Regulation M

March 14, 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 6, 1997, the

National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘Association’’)

filed with the Securities and Exchange

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

the proposed rule and on March 10,

1997, the Association filed Amendment