Federal Register / Vol. 60, No. 44 / Tuesday, March 7, 1995 / Notices 12583

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

2The subscriber fees imposed for receipt of this

information will be set forth in a separate rule filing

submitted pursuant to Section 19(b) of the Act. The

NASD does not believe that Commission

consideration of the instant proposal should be

contingent upon approval of the fees for this

service, as Nasdaq will make the service available

at no charge until an appropriate fee structure for

the service is approved by the Commission.

3Securities Exchange Act Release No. 33938

(Apr. 20, 1994), 59 FR 22033 (Apr. 28, 1994).

4The original notice of the NASD’s proposal set

forth in greater detail the basis for this feature.

Specifically, the original notice states that:

Because of the additional non-member

constituencies that will be able to view all

broadcast orders, the NASD is also proposing to

Continued

including the publication of all laws

and regulations concerning intellectual

property protection; and provide U.S.

right holders with enhanced access to

the Chinese market. The United States

and China will consult regularly on

China’s implementation of the

agreement.

On the basis of the measures that

China has agreed to undertake in the

agreement, the USTR has decided that

the action taken pursuant to section

301(b) (the increase in tariffs on certain

products from China) is no longer

appropriate and should be terminated.

The United States Custom Service has

been notified of this determination.

Pursuant to section 182(c)(1)(A) of the

Trade Act, the USTR has also decided

to revoke China’s designation as a

priority foreign country.

Section 307(a)(1)(C) of the Trade Act

authorizes the USTR to terminate any

action, subject to the specific direction,

if any, of the President, if, inter alia, the

USTR determines that the action being

taken under section 301(b) of the Trade

Act is no longer appropriate. Prior to

terminating this 301 action, the USTR

consulted with the domestic industries

concerned regarding the modification

and termination of the existing action.

An opportunity for public comment

prior to this action was not possible in

view of the need for expeditious action.

Immediate termination of the 301 action

was required so that U.S. intellectual

property right holders could

immediately start to receive the benefits

of the agreement entered into with

China. However, interested members of

the public are now invited to submit

comments to USTR regarding this action

in accordance with the directions

provided below. USTR will review these

comments upon receipt.

Pursuant to section 306 of the Trade

Act, the USTR will monitor China’s

implementation of the agreement. If, on

the basis of this monitoring, the USTR

considers that China is not satisfactorily

implementing the terms of the

agreement, the USTR will decide what

further action to take under section

301(a) of the Trade Act.

Public Comments

Comments must be filed in

accordance with the requirements set

forth in 15 CFR 2006.8(b) and are due

no later than noon, Friday, March 10,

1995. Comments must be in English and

be provided in twenty copies to:

Chairman, section 301 Committee,

Room 223, USTR, 600 17th Street, N.W.,

Washington, D.C. 20506.

Comments will be placed in a file

[Docket 301–92] open to public

inspection pursuant to 15 CFR 2006.13,

except confidential business

information exempt from public

inspection in accordance with 15 CFR

2006.15. Confidential business

information submitted in accordance

with 15 CFR 2006.15 must be clearly

marked ‘‘Business Confidential’’ in a

contrasting color ink at the top of each

page (on each of the 20 copies), and

must be accompanied by a

nonconfidential summary of the

confidential information. The

nonconfidential summary shall be

placed in the docket open to public

inspection.

Modification of the Harmonized Tariff

Schedule of the United States (HTS)

Accordingly, the HTS is hereby

modified by deleting subheadings

9903.50.01 through 9903.50.33,

inclusive, and the superior text

immediately preceding such

subheadings, effective February 26,

1995.

Irving A. Williamson,

Chairman, Section 301 Committee.

[FR Doc. 95–5664 Filed 3–6–95; 8:45 am]

BILLING CODE 3190–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–35428; File No. SR–NASD–

94–9, Amendment No. 2]

Self-Regulatory Organizations; Notice

of Amendment No. 2 To Proposed Rule

Change by National Association of

Securities Dealers, Inc. Relating to

Non-member Viewing Access to

SelectNet

February 28, 1994.

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

Securities Exchange Act of 1934

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

January 30, 1995, the National

Association of Securities Dealers, Inc.

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

the Securities and Exchange

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

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 its

proposal to enhance the transparency of,

and nonmember viewing access to,

‘‘broadcast’’ orders transmitted through

The Nasdaq Stock Market, Inc.’s

(‘‘Nasdaq’’) SelectNet service.

Specifically, the NASD proposes to

disseminate a separate feed of

‘‘broadcast’’ orders entered into

SelectNet that will be available to

vendors.2

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

In March 1994, the NASD proposed

modifications to the operation of

Nasdaq’s SelectNet service that would

permit viewing access by non-members

who are subscribers to the Nasdaq

Workstation Level 2 service to view

‘‘broadcast’’ orders immediately as they

are entered into the service.3 In

addition, because of the additional nonmember constituencies that will be able

to view all broadcast orders entered into

SelectNet, the NASD also proposed to

modify its order-entry procedure for

SelectNet to ensure that broadcast

orders are entered into and displayed

through SelectNet anonymously. This

feature was proposed for two reasons:

(a) To preserve incentives for dealers to

continue to make markets that add

liquidity to the market; and (b) to avoid

conditioning the market in one direction

or another by orders identified with

particular market makers or order entry

firms.4 With this filing, the NASD
12584 Federal Register / Vol. 60, No. 44 / Tuesday, March 7, 1995 / Notices

modify its order-entry procedure for SelectNet to

ensure that broadcast orders are entered into and

displayed through SelectNet anonymously. This

feature is proposed for two reasons: To preserve

incentives for dealers to continue to make markets

that add liquidity to the market and to avoid

conditioning the market in one direction or another

by orders identified with particular market makers

or order entry firms. First, the NASD believes that

it is very important to retain incentives for market

makers to participate in the market. Market makers

put quotes in the Nasdaq system as a form of

advertisement that they stand ready and willing to

transact business at their quoted prices and sizes.

There are obligations that accrue to those market

makers, however, the NASD and the SEC require

market makers to be firm for their quotes and to

participate in order execution systems. Enabling

order entry firms to advertise buy and sell interest

freely, with no concomitant market maker

obligations, by attaching their names to SelectNet

orders so that anyone with a Workstation would be

able to contact the entity directly by telephone,

would eviscerate the positive attributes of being a

market maker with a quote in the Nasdaq system.

Second, allowing market makers (or order entry

firms) to put their names on broadcast orders might

condition or influence the market in a security by

advertising the buying or selling power of the

member firm. For example, if a broker/dealer that

is considered a lead market maker or a major

institutional block positioner in a security was

interested in buying shares in the stock, it might

broadcast a sell order in SelectNet, identify its name

on the order, and cause the market to react to the

sell interest and the power of the firm’s name.

Accordingly, other market makers in the stock

might react to the sell interest by dropping their

bids and the lead market maker would be able to

buy stock at a lower price than would otherwise

have been the case, simply because it was

advertising its name, or conditioning the market.

Indeed, similar conditioning effects might be

caused by any firm, order entry firm or market

maker, by entering orders that are quickly canceled

without actual trading interest by the entry firm.

Accordingly, the NASD proposes that member firms

enter all broadcast orders anonymously.

Although orders must be entered on an

anonymous basis, once two firms are in negotiation

over the terms of the broadcast order, the order

entry firm may of course identify itself to the contra

side. Presently, SelectNet provides members the

option of identifying themselves on broadcast

orders through their market maker identification

symbol, although this alternative is seldom used.

The information on SelectNet broadcast orders will

be made available to members and nonmember

subscribers to the Nasdaq Workstation Level 2

service. This proposal is intended to avoid

conditioning the market with orders that might be

canceled at any time without actual trading interest

by the order entry firm.

Securities Exchange Act Release No. 33938 (Apr.

20, 1994), 59 FR 22033 (Apr. 28, 1994 ).

5See Securities Exchange Act Release No. 25263

(Jan. 11, 1988), 53 FR 1430 (Jan. 19, 1988).

6See Securities Exchange Act Release No. 28636

(Nov. 21, 1990), 55 FR 49732 (Nov. 30, 1990).

7The SelectNet watch file is established by each

member firm and may contain as many as 300

securities. The member will then receive any

directed or broadcast order selected for inclusion in

the watch file.

8See Securities Exchange Act Release No. 30581

(Apr. 14, 1992), 57 FR 14596 (Apr. 21, 1992).

9Market 2000: An Examination of Current Equity

Market Developments, Division of Market

Regulation, Securities and Exchange Commission

(Jan. 1994).

10See letters from Craig S. Tyle, Vice President

& Senior Counsel, Securities and Financial

Regulation, ICI, to Jonathan G. Katz, Secretary, SEC,

dated May 19, 1994, a 2–3, and from James E. Buck,

Senior Vice President & Secretary, NYSE, to

Jonathan G. Katz, Secretary, SEC, dated June 2,

1994, at 4–7.

proposes to modify its proposal by

providing for the dissemination of a

separate feed of ‘‘broadcast’’ orders

entered into SelectNet that will be

available to vendors. In particular, the

feed to vendors will contain information

on all orders broadcast in SelectNet,

partial executions of these orders, full

executions of these orders, and, if

applicable, when these orders timed-out

or were canceled.

SelectNet is the service operated by

The Nasdaq Stock Market that permits

NASD member firms to enter buy or sell

orders in Nasdaq securities into the

system, direct those orders to a single

market maker (directed orders) or

broadcast the order to all market makers

in the security. Originally implemented

in its predecessor form in 1988 as the

Order Confirmation Transaction

service,5 the primary function of that

service was to offer an automated

alternative to the telephone as a method

of contacting market makers in times of

market stress. To this end, order entry

firms could direct an order to buy or sell

a Nasdaq security to a single market

maker in the issue. When the service

was enhanced and renamed SelectNet in

1990,6 the broadcast feature was added

to permit a wider dissemination of

orders (i.e., ‘‘broadcast orders’’) to all

market makers in an issue. In addition,

the redesigned system allowed market

makers in a subject security to send a

broadcast order to all member firms that

had designated that security in their

SelectNet ‘‘watch file,’’7 whether the

firm was a market maker or not. In 1992,

the service was expanded to add preopening and after-hours sessions,8 so

that today SelectNet is available for

members to negotiate and execute

orders from 9:00 a.m. until 5:15 p.m.

Eastern Time. The Nasdaq Stock Market

operates SelectNet to provide investors

and members with an automated system

to facilitate communication of trading

interest between members, negotiation

of orders with the possibility of price

improvement with automated, locked-in

executions, and dissemination of last

sale reports to the tape. In addition,

SelectNet retains the original

functionality of the service as a

replacement for one-on-one

communication between members,

especially in times of market stress.

Since its enhancement in December

1990, the service has grown in

popularity with members and traffic has

increased significantly—from an average

of 3,000 transactions and 6 million

shares daily in the first half of 1991 to

over 10,000 transactions and more than

12 million shares daily in December

1994. As the system’s usage has

increased, institutions and other nonmembers have expressed a desire to

view the orders broadcast within the

service. Indeed, the Commission’s

Division of Market Regulation

(‘‘Division’’) recommended that ‘‘the

NASD [should] examine how to

improve access to information regarding

orders entered into SelectNet’’ in its

Market 2000 Report.9 Accordingly, as

noted above, in March 1994, the NASD

filed the instant rule proposal with the

Commission.

With this amendment to the filing, the

NASD now proposes to enhance further

the market transparency benefits of the

proposal by providing market

participants with a more cost-effective

and efficient means to receive

information on orders broadcast in

SelectNet. In particular, by making

SelectNet information available to

investors without the need for them to

procure Nasdaq Workstation Level 2

Service, the NASD believes investors

will have ready viewing access to an

expanded spectrum of information

regarding larger-size orders in Nasdaq

securities at an affordable and

reasonable cost. With this information,

the NASD believes investors will be

better able to assess the overall supply

and demand for a particular Nasdaq

stock, which, in turn, will permit them

to effect transactions in a more costeffective manner. Thus, the NASD

believes this proposal, as amended, will

promote the protection of investors and

the maintenance of fair and orderly

markets. The NASD also believes that

the proposal directly responds to one of

the Division’s key recommendations

designed to improve the transparency of

orders broadcast through the SelectNet

service.

This proposed amendment also is

responsive to comments raised

regarding the NASD’s proposal. In

particular, the Investment Company

Institute (‘‘ICI’’) and the New York Stock

Exchange (‘‘NYSE’’) commented that the

SelectNet order information should be

made available to all subscribers of

Nasdaq Level 2 price information, not

just to non-members that possess

Nasdaq Level 2 Workstations.10 Without

making the SelectNet order information

more broadly available at a lower cost,

these commentators maintain that the

improvements to market transparency

and the benefits to investors resulting

from the proposal will be minimal. The
Federal Register / Vol. 60, No. 44 / Tuesday, March 7, 1995 / Notices 12585

11 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 35153

(December 27, 1994), 60 FR 161.

3Telephone conversation between J. Keith Kessel,

Compliance Officer, Philadep, and Thomas C. Etter,

Continued

NASD believes these comments are fully

addressed by this proposed amendment.

The NASD believes the proposed rule

change is consistent with Sections

15A(b)(6) and 11A(a)(1)(C) of the Act

and is a particularly timely and germane

response to the recommendations

contained in the Market 2000 study.

Section 15A(b)(6) requires that the rules

of a national securities association 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 a national market system and in

general to protect investors and the

public interest. Section 11A(a)(1)(C)

finds that it is in the public interest to,

among other things, assure the

availability to brokers, dealers, and

investors of information with respect to

quotations for and transactions in

securities and economically efficient

execution of securities transactions.

The SelectNet service has served as an

alternative to the telephone in times of

market stress and as a system to

broadcast orders to market makers for

economically efficient negotiations and

executions. By permitting non-members

to view those broadcast orders, the

NASD is removing impediments to

transparency of market information and

is facilitating transactions for those nonmembers who will now be able to see

all broadcast orders in the service and

timely arrange for the execution of such

orders by a member. Although the

orders in SelectNet do not represent

quotations or last sale reports, the NASD

believes that the information is valuable

to investors and market participants and

should be transparent and disseminated

to non-members.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD believes that the proposed

rule change will not result in any

burden on competition that is not

necessary or appropriate in furtherance

of purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

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 NASD 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, 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. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File

Number SR–NASD–94–9 and should be

submitted by March 28, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–5462 Filed 3–6–95; 8:45 am]

BILLING CODE 8010–01–M

February 28, 1995.

Self-Regulatory Organization;

Philadelphia Depository Trust

Company; Order Approving Proposed

Rule Change Concerning Disposal of

Expired Securities Certificates of

Warrants and Rights

[Release No. 34–35426; File No. SR–

Philadep–94–05]

On October 6, 1994, the Philadelphia

Depository Trust Company (‘‘Philadep’’)

filed a proposed rule change (File No.

SR–Philadep–94–05) with the Securities

and Exchange Commission

(‘‘Commission’’) pursuant to Section

19(b) of the Securities Exchange Act of

1934 (‘‘Act’’).1 Notice of the proposal

appeared in the Federal Register on

January 3, 1995, to solicit comment from

interested persons.2 No comments were

received by the Commission. This order

approves the proposal.

I. Description of the Proposal

The proposal authorizes Philadep to

implement a program which allows it to

destroy certain expired securities

certificates, specifically expired

warrants and rights. This destruction

policy will enable Philadep to reduce

the administrative and safekeeping

expenses associated with keeping

expired warrants and rights related

certificates in its vault.

In implementing this program,

Philadep will adhere to several

procedures to help assure that Philadep

destroys only certificates for which the

warrant or rights have expired. First,

Philadep will contact the transfer agent

or the issuer of the securities after the

securities have reached their expiration

dates to verify that the respective

warrants or rights have expired. Second,

Philadep will obtain written

confirmation from the transfer agent that

the certificates representing the

warrants or rights have expired. If there

is no transfer agent, Philadep will obtain

such written confirmation from the

issuer. Philadep also will exercise such

other reasonable due diligence, as it

may deem necessary under the

circumstances, to confirm the expired

nature of the respective certificates

including consulting with Philadep’s

legal department, its internal audit

department, and its senior management.

Third, Philadep: (1) Will notify its

participants that the certificates have

expired in the judgment of the transfer

agent or of other appropriate parties

where there is no transfer agent; (2) will

delete such securities positions from its

participants’ account on or after the

thirtieth day following the date of the

notice to the participants; and (3) will

mark the securities certificates and send

them to its internal audit department for

destruction. Additionally, Philadep has

agreed to retain copies of all such

destroyed certificates on microfilm or

on other mediums for not less than one

year.3