20782 Federal Register / Vol. 60, No. 81 / Thursday, April 27, 1995 / Notices

4 15 U.S.C. 78f(b) (1988).

5 15 U.S.C. 78f(b)(4) (1988).

6The PSE’s listing fees for Tier I and Tier II

securities were last amended in Securities Exchange

Act Release No. 34276 (June 29, 1994), 59 FR 34892

(July 7, 1994). The original listing fee for Tier I and

Tier II securities is $20,000. The original listing fee

for Tier I and Tier II preferred stock (secondary

issuers) is $2,500.

7There is no conversion fee for preferred stock

because the original listing fee for Tier I and Tier

II preferred stock is lower than the original SCOR

listing fee for preferred stock.

8 15 U.S.C. 78s(b)(2) (1988).

9 17 CFR 200.30–3(a)(12) (1994).

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

2 17 CFR 240.19b–4 (1994).

3Letters from Joan Conley, Corporate Secretary,

NASD, to Mark Barracca, Branch Chief, SEC (Mar.

3, 1995) and Thomas R. Gira, Assistant General

Counsel, Nasdaq, to Mark Barracca, Branch Chief,

SEC (Mar. 22, 1995). The NASD amended its filing

to provide, most significantly that: (1) To be eligible

to qualify for a higher position limit, the underlying

security must satisfy the initial listing standards for

standardized options trading; (2) to continue to be

eligible to qualify for a higher position limit, the

underlying security must satisfy the maintenance

criteria for standardized options trading; and (3) if

the position limit is lowered, members will not be

required to liquidate their position but will be

prohibited from increasing it if it is above the new

limit.

4Under NASD rules, exercise limits placed on

options trading equal the limits imposed for options

positions. NASD Manual, Rules of Fair Practice,

Art. III, Sec. 33(b)(3)(A), (CCH) ¶ 2183.

5A conventional option is any option contract not

issued, or subject to issuance, by The Options

Clearing Corporation. NASD Manual, Rules of Fair

Practice, Art. III, Sec. 33(b)(1)(GG), (CCH) ¶ 2183.

6Position limits impose a ceiling on the number

of option contracts in each class on the same side

of the market (i.e., aggregating long calls and short

puts and long puts and short calls) that can be held

or written by an investor or group of investors

acting in concert. Exercise limits restrict the

number of options contracts which an investor or

group of investors acting in concert can exercise

within five consecutive business days. Under NASD

Rules, exercise limits correspond to position limits,

such that investors in options classes on the same

side of the market are allowed to exercise, during

any five consecutive business days, only the

number of options contracts set forth as the

SCOR Marketplace—Listing Fee

Schedule

Original Listings

The Original Listing fees are fixed fees

and issues are not charged by the

number of shares being listed.

Common Stock: $5,000.00

Preferred Stock: 5,000.00

Processing Fee

*Per Original Listing Application:

$500.00

Name change: 250.00

Change in Par Value: 250.00

*This is a fixed charge for the review

of potential listings and is nonrefundable. Issues approved for listing

may have this charge credited toward

the original listing fee.

Substitution of Original Listing

Per Application: Fixed charge of

$750.00

Substitution may occur as a result of

a change in state of incorporation,

reincorporation under laws of same

state, a reverse stock split,

recapitalizations, or similar events.

Listing of Additional shares

Per Application: $.0025 per share

Minimum charge of $500.00

Maximum charge of $2,500.00

Maximum charge of $5,000.00 per

annum

Annual Maintenance Fee

For one issue: $1,000.00

For each additional issue: 500.00

Payable January of each year

following listing.

Conversion Fee

Conversion from the SCOR Market

place to Tiers I or II.

Common Stock $15,000.00

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

exchange, and, in particular, with the

requirements of Sections 6(b).4 In

particular, the Commission believes the

proposal is consistent with the Section

6(b)(4) requirements that the rules of an

exchange provide for the equitable

allocation of reasonable dues, fees, and

other charges among its members,

issuers, and other persons using the

Exchange’s facilities.5 The Commission

believes that the fee schedule for the

initial and continued listing of SCOR

securities is equitable because the fees

should not result in an excessive

allocation of PSE fees on its issuers as

opposed to members and other persons

using its facilities.

The Commission notes that, except for

the SCOR original listing fees, the fee

schedule for SCOR securities is

consistent with the Exchange’s fee

schedule for Tier I and Tier II

securities.6 The Commission believes

that it is reasonable for the Exchange to

impose a lesser initial listing fee for

common stock SCOR listings because

these issuers will be smaller companies

listing single classes of securities. The

Commission also believes that it is

reasonable for the Exchange to apply the

original listing fee for SCOR preferred

stock and common stock because it is

likely that the costs incurred by the

Exchange in processing the listing

applications for common and preferred

stock will be the same. Additionally, the

Commission believes that the

conversion fee for common stock that

moves from the SCOR list to the Tier I

or Tier II lists is reasonable because,

when added to the SCOR original listing

fee, SCOR issuers will have paid the

same amount for listing as those that

listed common stock on the PSE directly

under Tier I or Tier II.7

It is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,8 that the

proposed rule change (SR–PSE–95–03)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–10330 Filed 4–26–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35634; File No. SR–NASD–

94–54]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Granting Approval

and Notice of Filing and Order

Granting Accelerated Approval of

Amendments No. 1 and 2 of Proposed

Rule Change Relating to Position and

Exercise Limits for Equity Options

Overlying Equity Securities Not

Subject to Standardized Options

Trading

April 20, 1995.

I. Introduction

On October 12, 1994, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) filed with

the Securities and Exchange

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

a proposed rule change pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’)1 and Rule

19b–4 thereunder.2 On March 3 and 22,

1995, and NASD submitted

amendments to the proposal.3 The

NASD proposes to amend its Rules of

Fair Practice to allow, under certain

circumstances, members to increase the

applicable position and exercise limits 4

for conventional options 5 overlying

those equity securities that are not

subject to standardized options trading.6
Federal Register / Vol. 60, No. 81 / Thursday, April 27, 1995 / Notices 20783

applicable position limit for those options classes.

See NASD Manual, Rules of Fair Practice, Art. III,

Sec. 33(b) (3) & (4), (CCH) ¶ 2183.

7Securities Exchange Act Release No. 35180 (Dec.

30, 1994), 60 FR 2413 (Jan. 9, 1995).

8 ‘‘Access’’ firms are NASD members which

conduct a business in exchange-listed options but

which are not members of any of the options

exchanges upon which the options are listed and

traded.

9 In this connection, the NASD’s rules do not

specifically govern how a specific equity option

falls within one of the three position limit tiers.

Rather, the NASD’s position limit rule provides that

the position limit established by an options

exchange(s) for a particular equity option is the

applicable position limit for purposes of the

NASD’s rule. Under the rules of each of the options

exchanges, if the security underlying a standardized

option has trading volume of 40,000,000 shares over

the most recent six-month period or trading volume

of 30,000,000 shares over the most recent six-month

period and float of 120,000,000, it is subject to a

position limit of 10,500 contracts; if the security

underlying a standardized option has trading

volume of 20,000,000 shares over the most recent

six-month period or trading volume of 15,000,000

shares over the most recent six-month period and

float of 40,000,000, it is subject to a position limit

of 7,500 contracts; and, if the underlying security

is ineligible for a 10,500 or 7,500 contract position

limit, it is subject to a 4,500-contract position limit.

The rules of each options exchange are uniform in

regard to the above. See, e.g., Commentary .07 to

American Stock Exchange Rule 904 and

Interpretation and Policy .02 to Chicago Board

Options Exchange Rule 4.11.

10For foreign securities, before an option is

eligible for standardized options trading, market

surveillance sharing arrangements must be satisfied.

For the NASD to satisfy these requirements under

its proposal, prior to allowing higher (7,500 or

10,500) position and exercise limits for options

overlying a foreign security, the NASD will need to

ensure that: (1) It has in place a comprehensive

surveillance sharing agreement with the primary

exchange in the home country where the foreign

security is primarily traded; or (2) the combined

trading volume of the foreign security (and other

related securities) occurring in the U.S. markets

represents at least 50% of the combined worldwide

trading volume in the underlying security

(including other related securities). See Securities

Exchange Act Release No. 35554 (Jan. 31, 1994), 59

FR 5622 (Feb. 7, 1994).

11The five options exchanges are: Chicago Board

Options Exchange (‘‘CBOE’’); American Stock

Exchange (‘‘Amex’’); New York Stock Exchange

(‘‘NYSE’’); Philadelphia Stock Exchange (‘‘Phlx’’);

and Pacific Stock Exchange (‘‘PSE’’). See CBOE

Rules, Rule 5.3, (CCH) ¶2113; Amex Rules, Rule

915, (CCH) ¶9715; NYSE Rules, Rule 715, (CCH)

¶2715; Phlx Rules, Rule 1009, (CCH) ¶3009; PSE

Rules, Rule 3.6, (CCH) ¶3591.

12See CBOE Rules, Rules 4.11 & 4.12, (CCH)

¶2091 & 2092; Amex Rules, Rules 904 & 905, (CCH)

¶9704 & 9705; NYSE Rules, Rules 704 & 705, (CCH)

¶2704 & 2705; Phlx Rules, Rules 1001 & 1002,

(CCH) ¶3001 & 3002; PSE Rules, Rules 6.8 & 6.9,

(CCH) ¶4769 & 4775.

Notice of the proposed rule change

appeared in the Federal Register on

January 9, 1995.7 The Commission did

not receive any comments on the

proposal. For the reasons discussed

below, this order approves the proposed

change, as amended.

II. Description of the Proposed Rule

A. Background and Purpose

As indicated above, the NASD

proposes to allow members to increase

the applicable position and exercise

limits for conventional options

overlying those equity securities that are

not subject to standardized options

trading if certain conditions are

satisfied. For conventional equity

options traded by any NASD member, if

the underlying security is subject to

standardized options trading, the

NASD’s position limit for conventional

options on that security is the same

position limit imposed by the options

exchange(s) trading the option.

Specifically under NASD rules, position

and exercise limits for exchange-listed

options traded by access firms 8 or their

customers are determined according to

a ‘‘three-tiered’’ system, where,

depending upon the float and trading

volume of the underlying security, the

position limit for options on that

security is 4,500, 7,500, or 10,500

contracts.9 However, if the security

underlying the option is not subject to

standardized options trading, the

applicable position limit for

conventional options on the security is

the lowest tier, i.e., 4,500 contracts.

In some instances, however, a security

could be eligible for standardized

options trading and qualify for an

options exchange position limit of 7,500

or 10,500 contracts but, for purposes of

NASD position limits, it is subject to a

position and exercise limit of 4,500

contracts because it does not underlie

an exchange-listed standardized option.

Given that these securities could qualify

for higher position limits but are not

eligible for them solely because there is

no standardized option traded on them

in the U.S., the NASD believes its

option position limit rule may be

unduly restrictive for these securities

and unnecessarily constrain members’

legitimate hedging activity.

Accordingly, the NASD proposes to

amend Section 33 to provide that the

position limit for options on a security

shall be determined by the position

limit tier the security falls under,

regardless of whether the security is

subject to standardized options trading,

as long as the security meets the initial

and maintenance standards for

standardized options trading.

The NASD believes its proposal is

warranted for the following reasons.

First, if a security has sufficient trading

volume and public float to satisfy the

standards for a position limit of 7,500

contracts or 10,500 contracts, the NASD

does not believe that raising the position

and exercise limits for conventional

options on the security will adversely

affect the cash market for that security.

In the NASD’s view, if the cash market

for a security is large enough to qualify

for an options position limit of 7,500

contracts or 10,500 contracts, it is

irrelevant whether that security is only

subject to conventional options trading

and not standardized options trading.

The NASD believes the primary

consideration governing the appropriate

position limit level for options on a

security should be the characteristics

and size of the underlying cash market

for that security, not whether the

options overlying the security are

standardized or conventional. Second,

the NASD does not believe its members’

activities in the conventional options

market should be linked to or

constrained by decisions of the options

exchanges concerning whether or not to

trade options on particular securities.

Moreover, the NASD believes that its

proposal will not compromise the

stability of the securities markets

underlying the conventional options

eligible for the higher position limits. In

this regard, for those securities that will

be eligible for higher position limits

under the proposal, there will only be

a slight increase in the percentage of

their capitalization that an investor or

group of investors acting in concert can

control under the new position limits.

B. New Proposal

The NASD proposes to permit

position and exercise limits of up to

either 7,500 or 10,500 contracts,

whichever is applicable, for

conventional options, if the equity

security satisfies the initial criteria and

other listing standards for standardized

options trading and otherwise qualifies

for a higher position and exercise limits

of 7,500 or 10,500 contracts.10 Prior to

establishing such a higher position, the

member first must demonstrate to the

NASD’s Market Surveillance

Department that the underlying equity

security satisfies the initial listing

criteria for standardized options trading

and qualifies for a higher position and

exercise limit of 7,500 or 10,500

contracts. The initial listing criteria for

standardized options trading are

uniform among the five U.S. options

exchanges (collectively referred to as the

‘‘options exchanges’’). 11 Likewise, the

criteria for qualifying for a higher

position and exercise limit of 7,500 or

10,500 contracts is uniform among the

options exchanges.12

After a member has demonstrated that

an equity security meets the criteria for

increased position and exercise limits,

the increased limit will remain in effect

for all other conventional options

positions established by the same or

other NASD members on that equity
20784 Federal Register / Vol. 60, No. 81 / Thursday, April 27, 1995 / Notices

13See CBOE Rules, Rule 5.4, (CCH) ¶2114; Amex

Rules, Rule 916, (CCH) ¶9716; NYSE Rules, Rule

716, (CCH) ¶2716; Phlx Rules, Rule 1010, (CCH)

¶3010; PSE Rules, Rule 3.7, (CCH) ¶3597.

14 If the maintenance criteria is not satisfied, the

security would not be eligible for standardized

option listing and, therefore, the position and

exercise limits would return to 4,500 contracts,

regardless of whether the volume and float data of

the security continue to meet the criteria for a

higher position and exercise limit.

15 If, however, subsequent to the six-month

review, the security becomes eligible for a higher

limit prior to the next review, the NASD may

increase immediately the position and exercise

limit to the applicable level.

16Letters from Joan Conley, Corporate Secretary,

NASD, to Mark Barracca, Branch Chief, SEC (Mar.

3, 1995) and Thomas R. Gira, Assistant General

Counsel, Nasdaq, to Mark Barracca, Branch Chief,

SEC (Mar. 22, 1995).

17This could occur if from the time the NASD

granted a higher position and exercise limit and the

time the standardized option was introduced the

trading characteristics of the security changed so

that the standardized option was introduced at a

lower position limit.

18 If a position limit is lowered, the NASD will

not require liquidation to the new limit, but will

prohibit increasing further the position. Letter from

Joan Conley, Corporate Secretary, NASD, to Mark

Barracca, Branch Chief, SEC (Mar. 22, 1995).

19The NASD will provide this notification in its

Notice to Members announcing the Commission’s

approval of this proposal. Letter from Thomas R.

Gira, Assistant General Counsel, Nasdaq, to Mark

Barracca, Branch Chief, SEC (Mar. 22, 1995).

20NASD rules provide that, for purposes of

assessing whether a member is complying with

limits on options positions, standardized and

conventional options positions must be aggregated.

NASD manual, Rules of Fair Practice, Rule

33(b)(3)(A), (CCH) ¶ 2183.

21 15 U.S.C. 78o–3(b)(6).

22The Commission notes that, with regard to

options overlying foreign securities, the

surveillance related requirements that apply to

standardized options trading on foreign securities

must also be met by the NASD before it allows

increased conventional option position and exercise

limits. See supra note 10.

23See NASD Notice to Members 94–64, NASD

Reminds Members of Their Obligations When

Trading Options (June 1994).

security, subject to a review to be

conducted by the NASD on the Monday

following the third Friday of the next

January or July, whichever occurs first,

and each successive January and July.

The NASD’s periodic reviews will be

conducted to determine whether: (a)

The underlying equity security

continues to satisfy the options

exchanges’ maintenance criteria for

listing standardized options upon such

security;13 and (b) the equity security

continues to satisfy the criteria for

higher position and exercise limits. If

either test is not satisfied, the position

and exercise limit will be lowered to the

applicable level,14 effective on the

Monday following the third Friday of

January or July.15 If position and

exercise limits are lowered, a member

will not be required to reduce its

position to meet the new position limit

level; however, a member will not be

permitted to increase its existing

position if such position is greater than

the new limit.16

Finally, the NASD recognizes that its

proposal allows for the possibility that

a NASD member complying with the

new position limit standards might

nonetheless be deemed in violation of

options exchange position limit

standards. Specifically, if an NASD

member is also a member of one or more

of the options exchanges, the member

could be in violation of the respective

option exchange’s position and exercise

limits if standardized options trading

commences covering an underlying

equity security for which the NASD

previously granted a higher (7,500 or

10,500 contracts) limit. The potential

risk arises if the options exchange

position and exercise limits are lower

than the NASD’s limits and the member

exceeds the exchange’s limit.17 While

the member would not violate the

NASD’s rule,18 the NASD cannot

exempt its members from the options

exchanges’ rules. To address this

potential issue, the NASD has

committed to notifying its members 19

that they could be in violation of the

options exchanges’ rules if the options

exchanges do not grant an exemption

under the above described

circumstances.20

III. Discussion

The Commission believes that the rule

change is consistent with the

requirements of Section 15A of the Act

of the rules and regulations thereunder

applicable to the NASD, and therefore,

has determined to approve the proposal.

Section 15A requires that the rules of

the NASD, among other things, 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, in general, to protect investors and

the public interest.21

Currently, NASD members trading

conventional equity options for which

there is no standardized options trading

covering the underlying equity security

are limited to a position of 4,500

contracts. Nonetheless, some of the

equity securities underlying these

conventional options meet the standards

for standardized options trading but, for

business or other reasons, none of the

options exchanges have decided to list

standardized options upon them.

Moreover, some of these equity

securities satisfy the criteria to qualify

for options position and exercise limits

of 7,500 or 10,500 contracts. However,

because there are no standardized

options traded upon them, the position

and exercise limits remain at 4,500

contracts.

The Commission believes it is

appropriate for the NASD to increase, as

proposed, its applicable equity option

position and exercise limits to allow its

members that establish positions in

conventional options the benefit of

those higher limits where the

underlying security fully qualifies 22 to

be eligible for standardized options

trading and the trading volume and/or

shares outstanding for the underlying

equity security warrant such increase.

Moreover, the NASD has essentially

agreed to review and apply the equity

option maintenance standards used by

the options exchanges, as well as the

position and exercise limit standards,

using procedures that basically mirror

those that have been instituted by the

options exchanges. The monitoring

standards outlined above will provide

that position and exercise limits are

maintained at appropriate levels.

Accordingly, this substitute review will

allow the NASD to address those

instances where the options exchange

could list and trade equity options,

subject to the 7,500 or 10,500 position

and exercise limit tier but, for business

or other non-regulatory reasons, have

decided not to list such options.

Moreover, the Commission believes

that the NASD proposal should not

adversely affect the cash market for the

underlying security. The options

overlying these securities will continue

to have position limits determined

based on established standards.23 In

addition, NASD members will be

required to aggregate with other

conventional options as well as

standardized options if they are

subsequently listed. Accordingly, the

Commission believes that this rule

change will not undermine the objective

of preventing the establishment of large

option positions that can be used to

manipulate or disrupt the underlying

market to the benefit of the option

position.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning Amendments No.

1 and 2. Persons making written

submissions should file six copies

thereof with the Secretary, Securities

and Exchange Commission, 450 Fifth

Street, NW., Washington, DC 20549.
Federal Register / Vol. 60, No. 81 / Thursday, April 27, 1995 / Notices 20785

24 15 U.S.C. 78s(b)(2).

25 17 CFR 200.30–3(a)(12) (1994).

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

2Securities Exchange Act Release No. 35257

(January 20, 1995), 60 FR 5446.

3Letters from M. Dryhurst, Cage Manager,

Levesque Beaubien Geoffrion Inc., to Secretary,

Commission (February 8, 1995); Charles J. Dunlap,

C.G.A., Chief Financial Officer, Haywood Securities

Inc., to Secretary, Commission (February 7, 1995),

Donna M. Kenny, Back Office Manager, Global

Securities, to Secretary, Commission (February 9,

1995); D. Foreman, Manager, Clearing, Odlum

Brown, to Secretary, Commission (February 9,

1995); B.D. Harwood, Vice Chairman, Canaccord, to

Secretary, Commission (February 16, 1995); Gerald

H. Powers, Senior Vice President, Cantella & Co.,

Inc., to Secretary, Commission (February 16, 1995);

David R. Smith, Chief Financial Officer, McDermid

St. Lawrence Chisholm Ltd., to Secretary,

Commission (February 14, 1995); Phyllis Stevenson,

Manager, Operations, Meridian Securities

International Ltd., to Secretary, Commission

(February 10, 1995); Steve McKee, Registered

Representative, Golden Capital Securities Ltd., to

Secretary, Commission (February 14, 1995); Tony

Chan, Vice President, Golden Capital Securities

Ltd., to Secretary, Commission (February 14, 1995);

Jeff Rutledge, Registered Representative, Golden

Capital Securities Ltd., to Secretary, Commission

(February 14, 1995); Gus Wahlroth, Registered

Representative, Golden Capital Securities Ltd., to

Secretary, Commission (February 14, 1995); Jack

Finkelstein, Registered Representative, Golden

Capital Securities Ltd., to Secretary Commission

(February 14, 1995); Randy Shaw, Registered

Representative, Golden Capital Securities Ltd., to

Secretary, Commission (February 14, 1995); Rita

Gatto, Registered Representative, Golden Capital

Securities Ltd., to Secretary, Commission (February

14, 1995); Marie Martin, Vice President and

Operations Manager, Midland Walywn Capital Inc.,

to Secretary, Commission (February 22, 1995). The

comment letters are discussed in Section B below.

4For a description of ACT, refer to Securities

Exchange Act Release Nos. 27229 (September 8,

1989), 54 FR 38484 [File No. SR–NASD–89–25]

(order partially approving proposed rule change to

permit ACT to be used by self-clearing firms) and

28583 (October 26, 1990), 55 FR 46120 [File No.

SR–NASD–89–25] (order approving remainder of

File SR–NASD–89–25 to permit ACT to be used by

introducing and correspondent broker-dealers).

5ACT uses three methods to lock-in trades: (1)

Trade-by-trade match, whereby both sides of the

trade are reported to ACT and matched; (2) trade

acceptance, whereby one side of the trade is

reported to ACT and accepted by the contra-side;

and (3) aggregate volume match, whereby ACT

performs a batch-type comparison at the end of

each day that aggregates previously unmatched

trade reports to effect a match. (For example, two

identical trade reports for 300 and 400 shares of the

same security may be matched with a 700 share

trade report.)

6Among others, ACT has the following risk

management capabilities. First, ACT can compute

the dollar value of each trade report entered thereby

allowing member firms to assess their market

exposure during the trading day. Second, clearing

firms can establish daily gross dollar thresholds for

each correspondent’s trading activity. If a

correspondent reaches or exceeds the threshold, the

clearing firm is so notified. Third, ACT alerts

clearing firms when a correspondent reaches 70%

or 100% of its daily gross dollar threshold. Fourth,

ACT has a single trade limit that provides clearing

firms with a 15 minute review period prior to

becoming obligated to clear a trade of $1,000,000 or

more executed by one of its correspondents. Fifth,

ACT has a super cap limit set at two times the gross

dollar thresholds for purchases and sales but in no

Continued

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 the file

number SR–NASD–94–54 and should be

submitted by May 18, 1995.

V. Conclusion

For the reasons stated above, the

Commission finds that the rule change

is consistent with the Act and the rules

and regulations thereunder applicable to

the NASD, in particular, Section

15A(b)(6). In addition, pursuant to

Section 19(b)(2) of the Act,24 the

Commission finds good cause for

approving the proposed rule change, as

amended, prior to the 30th day after

publication of Amendments No. 1 and

2 in the Federal Register. These

amendments provide that the NASD

will apply initial listing and

maintenance criteria consistent with the

application of these criteria by the

options exchanges for determining

whether a security qualifies for

standardized options trading. The

Commission finds that no new

regulatory issues are raised by these

amendments and notes that prior to

them, the proposed rule change was

published in the Federal Register for

the full statutory period and no

comments were received.

It is therefore ordered, pursuant to

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

proposed rule change SR–NASD–94–54

be, and hereby is, approved, as

amended.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.25

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–10295 Filed 4–26–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35625; International Series

Release No. 804; File No. SR–NASD–94–

55]

Self-Regulatory Organizations;

National Association of Securities

Dealers; Order Approving a Proposed

Rule Change Relating to the Access of

West Canada Clearing Corporation and

Its Members to the Automated

Confirmation Transaction Service

April 19, 1995.

On October 12, 1994, the National

Association of Securities Dealers, Inc.

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

Exchange Commission (‘‘Commission’’)

a proposed rule change (File No. SR–

NASD–94–55) under Section 19(b)(1) of

the Securities Exchange Act of 1934

(‘‘Act’’) 1 to allow access by West

Canada Clearing Corporation (‘‘West

Canada’’) and its members to the

NASD’s automated confirmation

transaction service (‘‘ACT’’). Notice of

the proposal was published in the

Federal Register on January 27, 1995.2

Sixteen comment letters were received

that supported the proposal.3 For the

reasons discussed below, the

Commission is approving the proposed

rule change.

I. Description of the Proposal

A. Description

The NASD is amending its rule

regarding ACT to allow West Canada, a

nonmember of the NASD, and members

of West Canada who are not members of

the NASD to access this service. The

NASD also is amending the ACT rule to

reflect that NASD members functioning

as market makers in over-the-counter

equity securities are also classified as

ACT participants.

The NASD created and implemented

the ACT system in response to problems

experienced in the wake of the October

1987 market break and at the urging of

the Commission to consider accelerating

efforts to generate same day compared

trades.4 ACT has three primary features:

(1) Trade match processing (i.e., the

comparison of trade information and the

submission of locked-in trades for

regular way settlement to clearing

agencies on a trade date or next day

[‘‘T+1’’] basis); 5 (2) trade reporting for

transactions in securities that are subject

to real time trade reporting

requirements; and (3) risk management

features that provide firms with a

centralized, automated environment for

assessing market exposure during and

after the trading day and that permit

clearing firms to monitor and respond to

the ongoing trading activities of their

correspondents.6