42088 Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices

5 15 U.S.C. 78q–1.

6 15 U.S.C. 78q–1(b)93)(F). 7CFR 200.30-3(a)(12).

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

2 17 CFR 240.19b–4.

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

4 17 CFR 19b–4(e)(3).

5See Securities Exchange Act Release No. 40069

(June 4, 1998) 63 FR 31820.

6See Securities Exchange Act Release No. 39729

(March 6, 1998) 63 FR 12559 (March 13, 1998)

(order approving File No. SR–NASD–97–56).

calculating the pro rata loss allocation,

the average daily margin calculation for

each member will be determined

without regard to the interim margin

procedures except that any daily margin

calculation for a special member that

exceeds the special member’s base

requirement shall be considered as the

base requirement.

EMCC believes that the proposed rule

change is consistent with the

requirements of Section 17A of the Act 5

and the rules and regulations

thereunder because it will facilitate the

prompt and accurate clearance and

settlement of securities transactions.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

EMCC 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. EMCC will notify

the Commission of any written

comments it receives.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Section 17A(b)(3)(F) of the Act 6

requires that the rules of a clearing

agency be designed to assure the

safeguarding of securities and funds

which are in the custody or control of

the clearing agency or for which it is

responsible. The Commission believes

that the proposed rule change should

provide EMCC with margin that is

adequate to protect EMCC from

financial exposure if an interdealer

broker or clearing firm experiences

financial difficulty while still providing

a clearing fund framework which does

not deter interdealer brokers and

clearing firms from joining EMCC.

Therefore, the Commission believes that

the proposed rule change is consistent

with EMCC’s safeguarding obligations

under Section 17A(b)(3)(F) of the Act.

EMCC has requested that the

Commission approve the proposed rule

change prior to the thirtieth day after

publication of the notice of the filing.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the

publication of notice because such

approval should immediately encourage

additional participation in EMCC which

should in turn reduce risk to those

involved in emerging market debt

transactions.

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. 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

Section, 450 Fifth Street, NW,

Washington, DC 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of EMCC. All submissions should

refer to File No. SR–EMCC–98–04 and

should be submitted by August 27,

1998.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

EMCC–98–04) be and hereby is

approved on an accelerated basis.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–21059 Filed 8–5–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40286; File No. SR–NASD–

98–38]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc; Order Approving

Proposed Rule Change Relating to

NASD’s Order Audit Trail System and

Recordkeeping Rules

July 31, 1998.

I. Introduction

On May 22, 1998, the National

Association of Securities Dealers, Inc.

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

wholly-owned subsidiary, NASD

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

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 to amend NASD

Books and Records Rule 3110 and

NASD Order Audit Trail System

(‘‘OATS’’) Rules 6954 and 6957 to

clarify and modify the recordkeeping

requirements associated with the OATS

rules.

On June 10, 1998, the proposed rule

change was published for comment in

the Federal Register and notice was

given that three non-substantive,

technical revisions to NASD Rules 3110

and 6957, which were concerned solely

with the administration of the NASD,

had become effective pursuant to

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

subparagraph (e)(3) of Rule 19b–4 4

thereunder 5. This order approves the

portions of the proposal relating to

substantive amendments to the OATS

recordkeeping requirements.

II. Background and Description of the

Proposal

On March 6, 1998, the Commission

approved NASD OATS Rules 6950

through 6957.6 The OATS rules require

member firms to capture and record

specific information related to the

handling or execution of orders for

equity securities in The Nasdaq Stock

Market (‘‘Nasdaq’’). Firms must then

report that information to the NASD

through OATS. The rules also require

members to synchronize their business
Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices 42089

7 In approving this rule, the Commission

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

8 15 U.S.C. 78o–3(b)(6).

9 15 U.S.C. 78o–3.1.

9 15 U.S.C. 78s(b)(2).

10 17 CFR 200.30–+3(a)(12).

clocks to one time source. At the same

time, the Commission also approved

new NASD Rule 3110(h), which

requires members to record and

maintain certain information that is

relevant to the OATS data reporting

requirement.

The NASDR proposes to amend the

OATS Rules and the books and records

requirements that apply specifically to

OATS data. The proposal would revise

OATS Rule 6954(c) by adding a new

paragraph (6). Rule 6954(c) sets forth the

order information that must be recorded

under the OATS rules when an order is

transmitted, either from one department

to another within a member firm or to

another member. Rule 6954(c) does not,

however, presently contain a

requirement regarding the transmission

of an order to a non-member such as a

foreign broker-dealer or a foreign

exchange. The NASDR proposes to add

new paragraph (6) to Rule 6954(c) to

require members to record certain

information when an order is

transmitted to a non-member, including

the fact that it was so transmitted.

NASD members will be required to

report this information to OATS

pursuant to NASD Rule 6955. This

additional information will enable the

NASDR to track an order that a member

has received and reported to OATS that

is then routed to a non-member.

The NASDR also proposes to revise

both OATS Rule 6954(a)(4) and Rule

3110(h) to set forth specific recordkeeping requirements. OATS Rules

6954(a)(1) and (a)(4) require members to

record specified information and to

retain records of that information; Rule

3110(h) requires members to record and

maintain information required by

OATS. However, these rules presently

do not specify how long the records

must be maintained or the requirements

that apply when members wish to

utilize micrographic media or electronic

storage media to maintain such records.

The NASDR proposes to add new

language to both Rule 6954(a)(4) and

Rule 3110(h) to make explicit the

record-keeping requirements related to

OATS data. The rules have been revised

to specifically reference the record

retention period specified in SEC Rule

17a–4(b) and the conditions set forth in

SEC Rule 17a–4(f) for reproducing

records on micrographic media or by

means of electronic storage media.

In addition, the NASDR proposes to

revise Rule 310(h)(1) to require

members to record and maintain

information related to an ‘‘order,’’ as

that term is defined in OATS Rule

6951(j). As stated above, new Rule

3110(h) was adopted to require

members to record and maintain

information relevant to the OATS data

recording and reporting requirements.

The NASDR proposes to limit Rule

3110(h) to require members to record

and maintain information only with

respect to an ‘‘order’’ in Nasdaq equity

securities, as defined by OATS Rule

6951(j).

Finally, the NASDR proposes to revise

Rule 6957(d) to indicate the

effectiveness dates for compliance with

the proposed amendments to Rule

3110(h).

III. Discussion

After careful review, 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.7 Specifically, the

Commission believes the proposal is

consistent with the requirements of

Section 15A(b)(6) of the Act 8 in that it

is designed to prevent fraudulent and

manipulative acts and practices and to

protect investors and the public interest.

The Commission notes that the

proposed addition of paragraph (6) to

Rule 6954(c) will require member firms

to record information relating to the

transmission of orders to non-members,

such as foreign broker-dealers and

foreign exchanges. The Commission

believes that this information, which

will be reported to OATS pursuant to

Rule 6955, should enhance the

NASDR’s ability to track transactions in

Nasdaq equity securities. OATS was

designed primarily to improve the

NASDR’s ability to monitor member

firms’ transactions in Nasdaq equity

securities for possible violations of

NASD rules or of the federal securities

laws, a purpose that is consistent with

Section 15A of the Act.9 Because the

current proposal will enhance the

NASD’s ability to gather information

required by the OATS rules, it too is

consistent with the Act.

The proposed amendments relating to

the recordkeeping requirements

applicable to OATS are designed to

provide more specific information

regarding the permissible maintenance

of required records. Specifically, the

proposal specifies the length of time

required records must be maintained

and the requirements applicable to the

use of micrographic or electronic storage

media. The proposal also specifically

references the record retention period

and conditions set forth in the

Commission’s Rule 17a–4. The

Commission believes that the proposed

amendments should help to clarify

member firms’ record retention

requirements related to OATS data.

The Commission notes that the

proposal would reference in NASD Rule

3110(h) the definition of the term

‘‘order’’ set forth in OATS Rule 6951(j).

The Commission believes that the

NASDR’s efforts to achieve consistency

and uniformity in the definitions used

in the NASD rules are reasonable and

should ease the compliance burdens of

member firms.

Finally, the Commission notes that

the proposal would establish effective

dates for compliance with the proposed

amendments to Rule 3110(h). The

Commission believes that the proposed

deadlines for compliance are

reasonable, given the implementation

schedule of the OATS rules, set forth in

NASD Rule 6957(a)–(c).

It Is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,9 that the

proposed rule change (SR–NASD–98–

38) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–20968 Filed 8–5–98; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF STATE

[Public Notice 2866]

Bureau of Political-Military Affairs;

Imposition of Nonproliferation

Measures Against Entities in Russia

AGENCY: Department of State.

ACTION: Notice.

SUMMARY: The Acting Secretary of State

has determined that seven entities in

Russia have engaged in missile

technology proliferation activities that

require the imposition of measures

pursuant to Executive Order No. 12938

of November 14, 1994, as amended by

Executive Order No. 13094 of July 28,

1998.

EFFECTIVE DATE: July 30, 1998.

FOR FURTHER INFORMATION CONTACT: On

general issues; Vann H. Van Diepen,

Director, Office of Chemical, Biological

and Missile Nonproliferation, Bureau of

Political-Military Affairs, Department of

State (202–647–1142). On import ban

issues: John T. Roth, Director, Policy

Planning and Program Management,