Federal Register / Vol. 60, No. 96 / Thursday, May 18, 1995 / Notices 26753

1 15 U.S.C. 78o-3.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–12186 Filed 5–17–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35712; File No. SR–NASD–

95–18]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc., Relating to Corporate

Financing Underwriting Terms and

Arrangements

May 12, 1995.

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 May 3, 1995, 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

The NASD is herewith filing a

proposed rule change to Article III,

Section 44 of the Rules of Fair Practice.

Proposed new language is italicized;

proposed deletions are in brackets.

THE CORPORATE FINANCING RULE

Underwriting Terms and Arrangements

Sec. 44

* * * * *

(c) Underwriting Compensation and

Arrangements

* * * * *

(6) Unreasonable Terms and

Arrangements

* * * * *

(B) Without limiting the foregoing, the

following terms and arrangements,

when proposed in connection with the

distribution of a public offering of

securities, shall be unfair and

unreasonable:

(i)–(x) (Unchanged)

(xi) for a member or person associated

with a member to accept, directly or

indirectly, any non-cash sales incentive

item including, but not limited to, travel

bonuses, prizes and awards, from an

issuer or affiliate thereof in excess of

[$50] $100 per person per issuer

annually. Notwithstanding the

foregoing, a member may provide noncash sales incentive items to its

associated persons provided that no

issuer, or an affiliate thereof, including

specifically an affiliate of the member,

directly or indirectly participates in or

contributes to providing such non-cash

sales incentive; or

(xii) (Unchanged)

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.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

Subsection 44(c)(6)(B)(xi) of the

Corporate Financing Rule (the ‘‘Rule’’)

currently prohibits NASD members

from receiving non-cash sales incentives

from an issuer or its affiliates valued in

excess of $50 per person per issuer

annually. Such non-cash sales

incentives are typically de minimis in

nature, such as small souvenir or gift

items, provided by issuers to a member

or associated persons of a member. The

NASD is proposing an amendment to

the Rule to raise the permissible level of

non-cash sales incentives to $100 per

person, annually.

The NASD believes that a dollar

amount of $100 is still relatively low

and will neither compromise the intent,

nor reduce the ability, of the rule to

prevent fraudulent acts and practices

that might arise in connection with the

giving of gifts or payments by issuers

and their affiliates as non-cash

compensation to members or persons

associated with members.

Additionally, the amendment would

make the value-limitation provisions of

the Rule consistent with similar

provisions in Article III, Sections 10 and

34 of the Rules of Fair Practice, with

proposed amendments to Sections 26

and 29 now pending SEC approval, and

with Rule 350(a) of the New York Stock

Exchange (‘‘NYSE’’). The amendment to

the Rule would provide regulatory

consistency and simplify compliance for

member firms that are also members of

the NYSE.

The NASD believes that the proposed

rule change is consistent with the

provisions of Section 15A(b)(6) of the

Act,1 which require that the rules of the

association be designed to prevent

fraudulent and manipulative acts and

promote just and equitable principles of

trade in that the proposed rule change

allows for an increase in the dollar limit

to a level that is still reasonably de

minimis and provides for regulatory

consistency with other rules of the

NASD and the NYSE.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD does not believe that the

proposed rule change will result in any

burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act, as amended.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change 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 reasons 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

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

Security, Securities and Exchange

Commission, 450 Fifth Street NW.,

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
26754 Federal Register / Vol. 60, No. 96 / Thursday, May 18, 1995 / Notices

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

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the Exchange proposes to

require Phlx ROTs to execute at least 75% of their

quarterly trades in-assigned options for purposes of

receiving market maker margin treatment for offfloor orders. The Exchange originally proposed to

require an ROT to trade at least 50% of his quarterly

contract volume in-assigned options. In addition,

Amendment No. 1 states that Phlx proposes to

delete the fine schedules under the minor rule plan

originally proposed to address violations of the

heightened trading requirements, because violations

of this program are to be reviewed directly by the

Business Conduct Committee and are not to be

treated as minor rule plan violations. Finally, Phlx

proposes to clarify that the phrase ‘‘may exempt one

or more classes of options from this calculation’’ in

Commentary .01 to Phlx Rule 1014, is intended to

mean that certain options may not be eligible for

off-floor market maker treatment, consistent with

the approved provisions of the other exchanges. See

Letter from Gerald O’Connell, First Vice President,

Phlx, to Michael Walinskas, Branch Chief, Office of

Market Supervision (‘‘OMS‘‘), Division of Market

Regulation (‘‘Market Regulation’’), Commission ,

dated March 29, 1995 (‘‘Amendment No. 1’’).

4See Amendment No. 1, supra note 3.

5The Phlx’s minor rule violation enforcement

and reporting plan (‘‘minor rule plan’’), codified in

Phlx Rule 970, contains floor procedure advices

with accompanying fine schedules. Rule 19d–

1(c)(2) authorizes national securities exchanges to

adopt minor rule violation plans for summary

discipline and abbreviated reporting; Rule 19d–

1(c)(1) requires prompt filing with the Commission

of any final disciplinary actions. However, minor

rule violations not exceeding $2,500 are deemed not

final, thereby permitting periodic, as opposed to

immediate reporting. Although the Exchange is

proposing to amend several advices, only Advice

C–3 will contain a minor rule plan fine; hence, the

Exchange hereby proposes to amend its minor rule

plan by incorporating the proposed changes to

Advice C–3.

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 in the caption above and should

be submitted by June 8, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority, 17 CFR 200.30–3(a)(12).

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–12258 Filed 5–17–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35710; File No. SR–Phlx–

95–14]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 of Proposed Rule

Change by the Philadelphia Stock

Exchange, Inc., Relating to Extension

of Market Marker Margin Treatment to

Certain Market Marker Orders Entered

From Off the Trading Floor

May 12, 1995.

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

Securities Exchange Act of 1934

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

notice is hereby given that on March 1,

1995, Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by the Exchange. The

Exchange subsequently filed

Amendment No. 1 on April 3, 1995.3

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 Exchange, pursuant to Rule 19b–

4 of the Act, proposes to amend Phlx

Rule 1014, Commentary .01, to extend

market maker margin treatment to

opening orders entered by Phlx

Registered Options Traders (‘‘ROTs’’)

from off the Exchange floor, provided

that the greater of 1,000 contracts or

80% of ROT’s total transactions on the

Exchange in a calendar quarter are

executed in person, and not through the

use of orders. Phlx ROTs would also be

required to execute at least 75% of their

quarterly contract volume in assigned

options.4 In addition, the proposal

requires that all off-floor orders for

which an ROT receives market maker

treatment be consistent with such ROT’s

duty to maintain fair and orderly

markets, and, in general, be effected for

the purposes of hedging, reducing risk

of, or rebalancing open positions of the

ROT.

Corresponding amendments to five

Floor Procedure Advices (‘‘Advices’’),

which are administered pursuant to the

Exchange’s minor rule violation

enforcement and reporting plan,5 are

also proposed: B–3, Trading

Requirements; B–4, Phlx ROTs Entering

Orders from On-Floor and Off-Floor for

Execution of the Exchange; B–8, Use of

Floor Brokers; B–12, Phlx ROTs and

Specialist Entering Orders for Execution

on Other Exchanges in Multiply Traded

Options; and C–3, Handling Orders of

Phlx ROTs and Other Registered

Options Market Makers.

First, a new paragraph (b) to Advice

B–3, with a separate fine schedule for

violations, would contain the

heightened trading requirement to

receive limited market maker margin

treatment for off-floor orders. Violations

of Advice B–3(b) would not be subject

to a minor rule plan citation and fine,

but would be reviewed directly by the

Exchange’s Business Conduct

Committee pursuant to Phlx Rule 960

governing disciplinary proceedings.

In addition, an exception from the

general prohibition against placing offfloor orders in market maker accounts

would be added to Advice B–4 to permit

the proposed treatment for off-floor

orders. In order to incorporate this

proposal into the Floor Procedure

Advice handbook, Advice B–4 would

generally parallel the proposed

provision in Commentary .01. In

addition, Advice B–4 would require an

ROT to disclose to a Floor Broker,

among other things, that he is entering

an off-floor order for his market maker

account. Entering an off-floor order in

violation of the proposed new paragraph

in Advice B–4 would be subject to full

disciplinary proceedings and reviewed

by the Exchange’s Business Conduct

Committee.

Advice B–8 is proposed to be

amended by limiting its application to

the use of floor brokers while an ROT

is on the trading floor. Otherwise, an

ROT entering an order from off-floor

could not comply with the requirement

to initial the order ticket.

Advice B–12 governs Phlx traders

entering orders in multiply traded

options onto another exchange,

currently requiring such orders to be

entered while the trader is on the Phlx

floor. Because off-floor orders for a

market maker account will become

permissible, Advice B–12 is proposed to

be amended to permit the entry of offfloor orders for execution on another

exchange in multiply traded options.

Such orders, entered pursuant to Rule

1014, Commentary .01, must otherwise

comply with the requirements of Advice

B–12, including ‘‘clearing the Phlx

crowd.’’

Lastly, Advice C–3 would be

amended to require Floor Brokers to

mark an order ticket with the letter ‘‘P’’

if an ROT indicates that an off-floor

order is to be entered into his market

maker account. Fines for violations of

Advice C–3 would be administered

pursuant to the Exchange’s minor rule

plan. This proposal would apply to

ROTs on both the options floor (equity

options and index options) as well as

the foreign currency options floor. The

text of the proposed rule change is

available at the Office of the Secretary,

the Exchange, and at the Commission.

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

Exchange included statements

concerning the purpose of and basis for