Federal Register / Vol. 60, No. 35 / Wednesday, February 22, 1995 / Notices 9877

8 17 CFR 200.30–3(a)(56) (1994).

9 17 CFR 200.30–3(a)(12) (1994).

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

2Rule 17Ad–16 defines a ‘‘qualified registered

securities depository’’ as a clearing agency

registered under Section 17A of the Act that

performs clearing agency functions and that has

rules and procedures concerning its responsibility

for maintaining, updating, and providing

appropriate access to the information it receives

pursuant to this section.

3 17 CFR § 240.17Ad–16 (1994).

4Rule 17Ad–16 defines an ‘‘appropriate qualified

register securities depository’’ as the qualified

registered securities depository that the

Commission so designates by order or, in the

absence of such designation, the qualified registered

securities depository that is the largest holder of

record of all qualified registered securities

depositories as of the most recent record date.

5 17 CFR § 240.17Ad–16. See also Securities

Exchange Act Release No. 35039 (December 1,

1994), 59 FR 63656 (release adopting Rule 17Ad–

16).

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Avenue, 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

Room, 450 Fifth Avenue, NW.,

Washington, DC. Copies of such filing

will also be available for inspection and

copying at the principle office of DTC.

All submissions should refer to the File

No. SR–DTC–95–02 and should be

submitted by March 15, 1995.

It is hereby ordered, Pursuant to

Section 19(b)(2) that the proposed rule

change (File No. SR–DTC–95–02) be,

and hereby is approved. It is further

ordered, pursuant to delegated authority

that DTC is designated the appropriate

qualified registered securities

depository.8

For the Commission by the Division of

Market Regulation, pursuant to the delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–4277 Filed 2–21–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35380; File No. SR–MSTC–

95–2]

Self-Regulatory Organizations;

Midwest Securities Trust Company;

Notice of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change Relating to the

Modifications of Procedures

Implementing Rule 17Ad–16

February 15, 1995.

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

Securities Exchange Act of 1934 (the

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

January 24, 1995, the Midwest

Securities Trust Company (‘‘MSTC’’)

filed with the Securities and Exchange

Commission (the ‘‘Commission’’) the

proposed rule change as described in

Items I and II below, which items have

been prepared primarily by MSTC. The

Commission is publishing this notice

and order to solicit comments from

interested persons and to grant

accelerated approval of the proposed

rule change.

I. Self-Regulatory Organization’s

Statement of Terms of Substance of the

Proposed Rule Change

MSTC, a ‘‘qualified registered

securities depository,’’ 2 as that term is

defined in Rule 17Ad–16 3 under the

Act, proposes to adopt procedures to

maintain, update, and provide

appropriate access to the information it

receives pursuant to Commission Rule

17Ad–16. MSTC requests that the

Commission designate The Depository

Trust Company (‘‘DTC’’) as the

‘‘appropriate qualified registered

securities depository’’ 4 authorized to

receive Rule 17Ad–16 notices on behalf

of MSTC.

To ensure that Rule 17Ad–16 notices

are timely disseminated, DTC and

MSTC have agreed that all such notices

will be forwarded by DTC to MSTC via

facsimile transmission on a daily basis.

MSTC proposes to maintain the Rule

17Ad–16 notices received from DTC for

at least two years with the first six

months being in an easily accessible

place on MSTC’s premises.

MSTC proposes to maintain

conformity with Rule 17Ad–16 by

making all material information

contained in any Rule 17Ad–16 notice

that MSTC receives from DTC available

to its participants. This will be

accomplished by updating MSTC’s

security account masterfile on a daily

basis. Upon electronic inquiry by a

participant, the security account

masterfile will provide the participant

with on-line information about a

security, including the transfer agent’s

name and address.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

MSTC 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. MSTC 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 Purposes of, and

Statutory Basis for, the Proposed Rule

Change

On December 1, 1994, the

Commission adopted Rule 17Ad–16.5

Among other things, the rule requires a

transfer agent to file a notice with the

appropriate qualified registered

securities depository if the transfer

agent ceases to perform transfer agent

services or assumes transfer agent

services on behalf of an issuer or

changes its name or address. The rule

also requires the appropriate qualified

registered securities depository to

forward those notices to all qualified

registered securities depositories, that in

turn must notify their participants of

such transfer agent changes. Because

MSTC has agreed that DTC should be

the appropriate qualified registered

securities depository, transfer agents

will send these notices to DTC. DTC

then will forward a copy of these

notices to all qualified registered

securities depositories.

MSTC will provide its members online access to the information in the

notices by updating MSTC’s security

account masterfile on a daily basis. The

purpose of this proposed rule change is

to adopt procedures to implement and

assure compliance with Rule 17Ad–16.

MSTC states that the proposed rule

change is consistent with Sections

17A(b)(3) (A) and (F) of the Act in that

it facilitates the prompt and accurate

clearance and settlement of securities

transactions.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

MSTC believes that no burden will be

placed on competition as a result of the

proposed rule change.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

MSTC neither solicited nor received

written comments on the proposed rule

change.
9878 Federal Register / Vol. 60, No. 35 / Wednesday, February 22, 1995 / Notices

6 17 CFR 200.30–3(a)(12) (1994).

1NASD Manual, Rules of Fair Practice, Art. III,

Sec. 1 (CCH) ¶ 2151.07.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The Commission believes MSTC’s

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to registered transfer agents.

The proposed rule change will allow

MSTC to comply with Commission Rule

17Ad–16 which, among other things,

require each qualified registered

securities depository to provide its

participants the notices it receives from

transfer agents, directly or through the

appropriate qualified registered security

depository, when the transfer agent is

terminating or assuming transfer agent

services on behalf of an issuer or

changing its name or address. Rule

17Ad–16 became effective on February

6, 1995.

MSTC also has requested that the

Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of the filing in

the Federal Register. Accelerated

approval will permit MSTC to comply

immediately with the requirements of

Rule 17Ad–16. Thereby, the

Commission finds good cause for so

approving the proposed rule change.

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, 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 at

the Commission’s Public Reference

Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filings will also be available for

inspection and copying at the principal

office of the above-referenced selfregulatory organization. All submissions

should refer to the File No. SR–MSTC–

95–02 and should be submitted by

March 15, 1995.

It is therefore ordered, pursuant to

Section 19(b)(2) that the proposed rule

change (File No. SR–MSTC–95–02) is

hereby approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–4276 Filed 2–21–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35391; File No. SR–NASD–

94–62, Amendment No. 1]

Self-Regulatory Organizations; Notice

of Filing of Amendment No. 1 to

Proposed Rule Change by National

Association of Securities Dealers, Inc.,

Relating to Limit Order Protection for

Member-to-Member Limit Order

Handling on Nasdaq

February 16, 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 February 15, 1995,

the National Association of Securities

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

filed with the Securities and Exchange

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

an amendment to 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 proposes to amend SR–

NASD–94–62 relating to limit order

protection for member-to-member limit

order handling in the Nasdaq Stock

Market. Currently, the NASD’s

Interpretation to the Rules of Fair

Practice 1 makes it a violation of just and

equitable principles of trade for a

member firm to trade ahead of its own

customer’s limit orders. In this

amendment to its proposed expansion

of the Interpretation, the NASD is

proposing to amend the Interpretation to

clarify that the ‘‘terms and conditions’’

exception to the Interpretation applies

only to limit orders from institutional

accounts, whether such limit orders

come from a firm’s own customers or

are member-to-member limit orders. The

term ‘‘institutional account’’ is defined

in Article III, Section 21(c)(4) of the

Rules of Fair Practice. Below is the text

of the proposed rule change. Proposed

new language, including the language

that was added in the original proposal,

is italicized; language to be deleted is

bracketed.

Limit Order Protection Interpretation to

Article III, Section 1 of the NASD Rules

of Fair Practice

To continue to ensure investor

protection and enhance market quality,

the NASD Board of Governors is issuing

an Interpretation to the Rules of Fair

Practice dealing with member firm

treatment of [their] customer limit

orders in Nasdaq securities. This

Interpretation will require members

acting as market makers to handle

[their] customer limit orders with all

due care so that market makers do not

‘‘trade ahead’’ of those limit orders.

Thus, members acting as market makers

that handle customer limit orders,

whether received from their own

customers or from another member, are

prohibited from trading at prices equal

or superior to that of the limit order

without executing the limit order,

provided that, prior to September 1,

1995, this prohibition shall not apply to

customer limit orders that a member

firm receives from another member firm

and that are greater than 1,000 shares.

Such orders shall be protected from

executions at prices that are superior

but not equal to that of the limit order.

In the interests of investor protection,

the NASD is eliminating the so-called

disclosure ‘‘safe harbor’’ previously

established for members that fully

disclosed to their customers the practice

of trading ahead of a customer limit

order by a market-making firm.

Interpretation

Article III, Section 1 of the Rules of

Fair Practice states that:

A member, in the conduct of his

business, shall observe high standards

of commercial honor and just and

equitable principles of trade.

The Best Execution Interpretation

states that: In any transaction for or with

a customer, a member and persons

associated with a member shall use

reasonable diligence to ascertain the

best inter-dealer market for the subject

security and buy or sell in such a market

so that the resultant price to the

customer is as favorable as possible to

the customer under prevailing market

conditions. Failure to exercise such

diligence shall constitute conduct

inconsistent with just and equitable

principles of trade in violation of Article

III, Section 1 of the Rules of Fair

Practice.

In accordance with Article VII,

Section 1(a)(2) of the NASD By-Laws,

the following interpretation under

Article III, Section 1 of the Rules of Fair