4336 Federal Register / Vol. 63, No. 18 /Wednesday, January 28, 1998 / Notices

20Regarding the transparency of voided or

modified clearly erroneous transactions, Nasdaq

represented to the Division of Market Regulation

that whenever possible within the constraints of

Nasdaq’s systems, Nasdaq will endeavor to ensure

that the tape and historical record will be corrected

as soon as possible. Given that allegedly clearly

erroneous trades will now be brought to Nasdaq’s

attention within 30 minutes rather than within four

hours as was previously the case, it will be

significantly less likely that transactions voided or

modified as clearly erroneous will not be corrected

on the tape or historical record. Nasdaq also

represented that in 1997, when the time period was

still four hours, clearly erroneous transactions that

were modified or voided were almost always

corrected on the tape or historical record.

Conversation between Andrew S. Margolin, Office

of the General Counsel, Nasdaq, and Jeffrey R.

Schwartz, Special Counsel, Division of Market

Regulation, SEC, January 8, 1998.

21 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. The

proposed rule change likely will enhance the

efficiency and fairness of the process by which

clearly erroneous transactions are modified or

nullified. The proposal also should increase the

accuracy of transaction reports disseminated to the

public. The net effect of approving the proposed

rule change will be positive. 15 U.S.C. § 78c(f).

22See Securities Exchange Act Release No. 38196,

supra note 4.

23 15 U.S.C. § 78s(b)(2).

24 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.

III. Discussion

The Commission finds the proposed

rule change, by helping to ensure that

clearly erroneous transactions are

quickly corrected or nullified and

properly reported to the public, is

consistent with the Exchange Act and in

particular with Sections 15A(b)(6) and

11A(a)(1)(C) of the Exchange Act.

Among other things, Section 15A(b)(6)

requires that the rules of a national

securities association be designed 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)(6) also

provides that the rules of the association

not be designed to permit unfair

discrimination between customers,

issuers, brokers, or dealers. Section

11A(a)(1)(C) provides that, among other

things, it is in the public interest to

assure the availability to brokers,

dealers, and investors of information

with respect to quotations for and

transactions in securities.

In the proposed rule change, the

NASD provides greater specificity in the

procedures for resolving clearly

erroneous transactions and greater

flexibility to Nasdaq officials to remedy

such errors expeditiously. The

Commission believes that the

amendments to the NASD’s procedures

to review these transactions should

benefit market participants by

promoting fair and efficient resolution

of disputes involving clearly erroneous

transactions. In addition, the proposed

rule change—in particular the provision

for appeal to the MORC—addresses

concerns raised by the Commission in

its August 8, 1996, Report Pursuant to

Section 21(a) of the Securities Exchange

Act of 1934 Regarding the NASD and

The Nasdaq Stock Market regarding the

fairness of the clearly erroneous review

process. The NASD believes, and the

Commission agrees, that with these

amendments the process for resolving

clearly erroneous transaction

complaints would become fairer and

more efficient. In this regard, the

proposal is consistent with Exchange

Act Section 15A(b)(6) because it helps

to ensure that NASD Rule 11890 does

not permit unfair discrimination

between customers, issuers, brokers, or

dealers.

Further, it is important for the proper

functioning of the securities markets

that investors be able to rely on reported

transactions as accurately reflecting the

current state of the market and actual

executions. When clearly erroneous

transactions are publicly reported, it is

important that, whenever possible,20

Nasdaq correct these clear errors and

correct the inaccurate information that

was disseminated in the market about

these transactions as quickly as

possible.

For the foregoing reasons, the

Commission finds that the proposed

rule change is consistent with the

requirements of the Exchange Act and

the rules and regulations thereunder

applicable to national securities

association and, in particular, the

requirements of Sections 15A(b)(6) and

11A(a)(1)(c) and the rules and

regulations thereunder.21

Finally, the Commission finds good

cause for approving Amendment No. 2,

3, and 4 to the proposed rule change

prior to the thirtieth day after the date

of publication of notice of filing thereof.

The Exchange’s proposal was published

in theFederal Register for the full

statutory period.22 Amendment Nos. 2,

3, and 4 are technical amendments that

clarify the operation of the rule to

enhance market participants’

comprehension and compliance with

these procedures. The Amendments do

not diminish the rights of any

prospective party with respect to

resolving clearly erroneous transactions.

Consequently, the Commission finds

that there is good cause, consistent with

the Exchange Act, to accelerate approval

of Amendment Nos. 2, 3, and 4.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Exchange Act,23

that the proposed rule change (SR–

NASD–96–51) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.24

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–1975 Filed 1–27–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39563; File No. SR–NSCC–

97–14]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing of a

Proposed Rule Change to Modify

NSCC’s Procedures Regarding its

Trade Comparision Service

January 20, 1998.

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

Securities Exchange Act of 1934

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

December 9, 1997, the National

Securities Clearing Corporation

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

Exchange Commission (‘‘Commisssion’’)

the proposed rule change (File No. SR–

NSCC–97–14) 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 will modify

NSCC’s procedures regarding its trade

comparison system for over-the-counter

(‘‘OTC’’) securities.

II. Self-Regulatory Organizations’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
Federal Register / Vol. 63, No. 18 /Wednesday, January 28, 1998 / Notices 4337

3NSCC members use the delete of original trade

input to delete any item for which the comparison

process resulted in an uncompared trade.

4The demand withhold service deletes

previously compared OTC transactions which have

been canceled by mutual agreement of the buyer

and the seller.

5OTC trade data submitted by members which is

uncompared may be resubmitted through the

demand as of service.

6Advisory listings indicate trades which were

submitted by another party against the member but

which did not match any trade the member

submitted. 7 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 39288

(October 30, 1997) 62 FR 60297.

4See Letter from Agnes M. Gautier, Vice

President, Market Surveillance, NYSE to Sharon

Lawson, Senior Special Counsel, Division of Market

Regulation (‘‘Division’’), Commission, dated

December 26, 1997 (‘‘Amendment No. 1’’). In

Amendment No. 1, the NYSE clarified the proposal

with respect to: (1) Exchange representation at

interviews between specialist units and listing

companies; (2) Exchange review of written

materials supplied by specialist units to listing

companies; and (3) specialist unit contact with a

listing company. In addition, Amendment No. 1

deletes the sentence inviting listing companies to

express in a letter sent to the Exchange’s Allocation

Committee any preference not to be traded by

specialist units which trade the stock of the listing

companies’ competitors.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The proposed rule change will modify

NSCC’s procedures regarding its trade

comparison service. The proposed rule

change will discontinue the following

instructions: the ‘‘delete of original

trade input,’’3 the ‘‘demand withold,’’4

and the ‘‘demand as of.’’5 Such

instructions are used very infrequently

by NSCC members due to the growth of

automated processing systems. Their

elimination will result in reduced costs

to members.

Additionally, the change will

eliminate the ability to submit an

advisory listing after the first day after

trade date (‘‘T+1’’) for original input and

as of trades.6 This change results from

extremely limited acceptances of

advisories of T+2 and will also reduce

costs.

Under the third change, the

supplemental contract lists and the

added trade contract lists will no longer

carry forward totals. The supplemental

contract lists show all compared trades

resulting from adjustments submitted on

T+1. The added trade contract lists

show trades that are compared on T+2

and thereafter. NSCC has been advised

that due to the increasingly automated

processing environment, totalled

information is no longer necessary. This

will reduce computer processing time

and therefore will also diminish

production costs. These modifications

are scheduled to take place in April of

1998.

NSCC believes that the proposed rule

change is consistent with the

requirements of the Act and the rules

and regulations thereunder since it will

facilitate the prompt and accurate

clearance and settlement of securities

transactions and, in general, will protect

investors and the public interest.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

NSCC does not believe that the

proposed rule change will have an

impact on or impose a 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 relating to the

proposed rule change have been

solicited or received. NSCC will notify

the Commission of any written

comments received by NSCC.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five 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 ninety 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 NSCC 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, 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, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of NSCC. All submissions should

refer to the file number SR–NSCC–97–

14 and should be submitted by February

28, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–1976 Filed 1–27–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39564; File No. SR–NYSE–

97–30]

Self-Regulatory Organizations; New

York Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change and Notice of Filing and Order

Granting Accelerated Approval of

Amendment No. 1 to Proposed Rule

Change To Amend and To Make

Permanent the Allocation Policy and

Procedures Pilot Program

January 20, 1998.

I. Introduction

On October 20, 1997, the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission

(‘‘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 to

amend and to obtain permanent

approval of the Exchange’s Allocation

Policy and Procedures pilot program.

The proposed rule change was

published for comment in the Federal

Register on November 7, 1997.3 No

comments were received on the

proposal. On January 2, 1998, the NYSE

submitted Amendment No. 1 to the

proposed rule change.4 This order

approves the proposed rule change and

approves Amendment No. 1 on an

accelerated basis.

II. Background and Description of the

Proposal

The Exchange’s Allocation Policy and

Procedures (‘‘Policy’’) are intended: (1)

to ensure that securities are allocated in

an equitable and fair manner and that

all specialist units have a fair

opportunity for allocations based on

established criteria and procedures; (2)

to provide an incentive for ongoing

enhancement of performance by