[Federal Register Volume 61, Number 3 (Thursday, January 4, 1996)]
[Notices]
[Pages 358-359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-128]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-36650; File No. S7-24-89]


Joint Industry Plan; Solicitation of Comments and Order Approving 
Amendment No. 7 to Reporting Plan for Nasdaq/National Market Securities 
Traded on an Exchange on an Unlisted or Listed Basis, Submitted by the 
National Association of Securities Dealers, Inc., and the Boston, 
Chicago and Philadelphia Stock Exchanges

December 28, 1995.
    On December 28, 1995, the National Association of Securities 
Dealers, Inc., and the Boston, Chicago, and Philadelphia Stock 
Exchanges (collectively, ``Participants'') \1\ submitted to the 
Commission proposed Amendment No. 7 to a joint transaction reporting 
plan (``Plan'') for Nasdaq/National Market securities traded on an 
exchange on an unlisted or listed basis.\2\ Amendment No. 7 would 
extend the effectiveness of the plan through March 5, 1996.\3\ This 
order approves Amendment No. 7 to the Plan, thereby approving its 
operation through March 5, 1996.

    \1\ The signatories to the Plan, i.e., the National Association 
of Securities Dealers, Inc. (``NASD''), and the Chicago Stock 
Exchange, Inc. (``Chx'') (previously, the Midwest Stock Exchange, 
Inc.), the Philadelphia Stock Exchange, Inc. (``Phlx''), and the 
Boston Stock Exchange, Inc. (``BSE''), are the ``Participants.'' The 
BSE, however, joined the Plan as a ``Limited Participant,'' and 
reports quotation information and transaction reports only in 
Nasdaq/National Market (previously referred to as ``Nasdaq/NMS'') 
securities listed on the BSE. Originally, the American Stock 
Exchange, Inc., was a Participant to the Plan, but did not trade 
securities pursuant to the Plan, and withdrew from participation in 
the Plan in August 1994.
    \2\ Section 12 of the Act generally requires an exchange to 
trade only those securities that the exchange lists, except that 
Section 12(f) of the Act permits unlisted trading privileges 
(``UTP'') under certain circumstances. For example, Section 12(f), 
among other things, permits exchanges to trade certain securities 
that are traded over-the-counter (``OTC/UTP''), but only pursuant to 
a Commission order or rule. The present order fulfills this Section 
12(f) requirement. For a more complete discussion of this Section 
12(f) requirement, see November 1995 Extension Order, infa note 3, 
at n. 2.
    \3\ On November 13, 1995, the Commission extended the 
effectiveness of the Plan through December 12, 1995, by partially 
approving Amendment No. 6. Amendment No. 6 requested an extension of 
the effectiveness of the Plan through December 29, 1995. See 
Securities Exchange Act Release No. 36481 (November 13,1 995), 60 FR 
58119 (``November 1995 Extension Order''). Thereafter, the 
Commission approved the remainder of Amendment No. 6 by approving 
operation of the Plan through December 29, 1995. See Securities 
Exchange Act Release No. 36589 (December 13, 1995), 60 FR 65696 
(``December 1995 Extension Order'').

[[Page 359]]

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I. Background

    The Commission originally approved the Plan on June 26, 1990.\4\ 
The Plan governs the collection, consolidation and dissemination of 
quotation and transaction information for Nasdaq/National Market 
securities listed on an exchange or traded on an exchange pursuant to 
UTP. The Commission has extended the effectiveness of the Plan six 
times since then to allow the Participants to trade pursuant to the 
Plan while they finalize their negotiations for revenue sharing under 
the plan.\5\

    \4\ See  Securities Exchange Act Release No. 28146 (June 26, 
1990), 55 FR 27917 (``1990 Approval Order''). For a detailed 
discussion of the history of UTP in OTC securities, and the events 
that led to the present plan and pilot program, see 1994 Extension 
Order, infra note 5.
    \5\ See Securities Exchange Act Release No. 34371 (July 13, 
1994), 59 FR 37103 (``1994 Extension Order''). See also Securities 
Exchange Act Release No. 35221, (January 11, 1995), 60 FR 3886 
Release No. 36102 (August 14, 1995), 60 FR 43626 (``August 1995 
Extension order''), Securities Exchange Act Release No. 36226 
(September 13, 1995), 60 FR 49029 (``September 1995 Extension 
Order''), Securities Exchange Act Release No. 36368 (October 13, 
1995), 60 FR 54091 (``October 1995 Extension Order''), and the 
November and December 1995 Extension Orders, supra note 3.
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    As originally approved by the Commission, the Plan required the 
Participants to complete their negotiations regarding revenue sharing 
during the one-year pilot period. The January 1995 Extension Order 
approved the effectiveness of the Plan through August 12, 1995. Since 
January 1995, the Commission has expected the Participants to conclude 
their financial negotiations promptly and to submit a filing to the 
Commission that reflected the results of the negotiations. Moreover, 
the Commission's August 1995 Extension Order required the Participants 
to submit a filing concerning revenue sharing on or before August 31, 
1995. The Commission's December 1995 Extension Order noted that 
request, and further requested that the Participants submit to the 
Commission, on or before December 20, 1995, a proposed revenue sharing 
amendment, along with a proposed amendment to extend the effectiveness 
of the Plan through the pending period for the financial proposal.
    The Commission currently believes it is appropriate to extend the 
effectiveness of the Plan through March 5, 1996, so that operation of 
the Plan may continue while the Commission awaits these amendments and 
prepares them for publication in the Federal Register.

II. Extension of Certain Exemptive Relief

    In conjunction with the Plan, on a temporary basis scheduled to 
expire on December 29, 1995, the Commission granted an exemption from 
Rule 11Ac1-2 under the Act regarding the calculated best bid and offer 
(``BBO''), and granted the BSE an exemption from the provision of Rule 
11Aa3-1 under the Act that requires transaction reporting plans to 
include market identifiers for transaction reports and last sale data. 
This order extends these exemptions through march 5, 1996. Further, 
this extension will remain in effect only if the Plan continues in 
effect through that date pursuant to a Commission order.\6\ The 
Commission continues to believe that this exemptive relief is 
appropriate through March 5, 1996.

    \6\ In the December 1995 Extension Order, the Commission 
extended these exemptions through December 29, 1995. Pursuant to a 
request made by the NASD, this order further extends the 
effectiveness of the relevant exemptions through March 5, 1996. See 
letter from Richard Ketchum, Chief Operating Officer and Executive 
Vice President, NASD, to Jonathan G. Katz, Secretary, Commission, 
dated December 22, 1995.
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III. Comments on the Operation of the Plan

    In the January 1995 Extension Order, the August 1995 Extension 
Order, the September 1995 Extension Order, the October 1995 Extension 
Order, and the November 1995 Extension Order, the Commission solicited, 
among other things, comment on: (1) Whether the BBO calculation for the 
relevant securities should be based on price and time only (as 
currently is the case) or if the calculation should include size of the 
quoted bid or offer; and (2) whether there is a need for an intermarket 
linkage for order routing and execution and an accompanying trade-
through rule. The Commission continues to solicit comment on these 
matters.

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. Sec. 552, will be available for inspection and copying at 
the Commission's Public Reference Room. All submissions should refer to 
File No. S7-24-89 and should be submitted by January 25, 1996.

V. Conclusion

    The Commission finds that proposed Amendment No. 7 to the Plan to 
extend the operation of the Plan and the financial negotiation period 
through March 5, 1996, is appropriate and in furtherance of Section 11A 
of the Act. The Commission finds further that extension of the 
exemptive relief through March 5, 1996, as described above, also is 
consistent with the Act and the Rules thereunder. Specifically, the 
Commission believes that these extensions should serve to provide the 
Participants with more time to conclude their financial negotiations 
and to submit the necessary filings to the Commission. This, in turn, 
should further the objects of the Act in general, and specifically 
those set forth in Sections 12(f) and 11A of the Act and in Rules 
11Aa3-1 and 11Aa3-2 thereunder.
    It is therefore ordered, pursuant to Sections 12(f) and 11A of the 
Act and (c)(2) of Rule 11Aa3-2 thereunder, that Amendment No. 7 to the 
Joint Transaction Reporting Plan for Nasdaq/National Market securities 
traded on an exchange on an unlisted or listed basis is hereby approved 
and trading pursuant to the Plan is hereby approved on a temporary 
basis through March 5, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority, 17 CFR 200.30-3(a)(29).
Jonathan G. Katz,
Secretary.
[FR Doc. 96-128 Filed 1-3-96; 8:45 am]
BILLING CODE 8010-01-M