31604 Federal Register / Vol. 61, No. 120 / Thursday, June 20, 1996 / Notices

1 15 U.S.C. § 78s(b)(1) (1988).

2 17 CFR 240.19b–4 (1994).

3Securities Exchange Act Release No. 35074 (Dec.

9, 1994), 59 FR 64827 (Dec. 15, 1994) (order

approving File No. SR–NASD–94–58).

4The term ‘‘interest and dividends’’ includes

interest from a member’s customer margin accounts

and interest and dividends from a member’s trading

and investment positions, such as from repurchase

and reverse repurchase agreements and stock loan

and borrow transactions.

increased risk of transacting with more

informed traders.

The experimental results suggest that

the introduction of a limit order facility

narrows the displayed spread and

increases order placements. Under the

uninformed dealer scenario, the

displayed spread narrows by about 25

percent. Under the informed dealer

scenario, the displayed spread narrows

by about 50 percent. The addition of a

limit order facility increased limit order

placement to about 50 percent of all

orders and reduced market order

placement to about 50 percent of all

orders. Limit orders were executed 45

percent of the time under the

uninformed dealer scenario and about

50 percent of the time under the

informed dealer scenario. The addition

of a limit order facility increased overall

orders placed by about 18 percent but

decreased overall orders executed by

about 5 percent.

The experimental results also suggest

that the introduction of a limit order

facility is particularly important to

investors in stocks when spreads are

greater than 1⁄4. There is some evidence,

although not consistent over all

categories, that the greater the size of the

displayed spread, the greater the use of

limit orders. For three out of four

categories, a larger percentage of limit

orders were placed when displayed

spreads were 3⁄8 and 1⁄2 than when

displayed spreads were 1⁄8 and 1⁄4.

The simulation also measured dealer

profitability. The results on dealer

profitability changes after the

introduction of a limit order facility

were mixed. The marginal rate of dealer

profits in basis points decreased under

the uninformed dealer scenario but

increased under the informed dealer

scenario.

The results are taken from a small

sample of 24 experimental subjects.

Since subjects had a limited amount of

training in the simulated trading

environment, better trained subjects

may have led to different results. The

simulation model makes simplifying

assumptions about order flow

characteristics, dealer quote setting

behavior, and price movements in the

Nasdaq market. For instance, the exact

structure of NAqcess was not

completely determined when the

experiments were conducted. Thus, the

limit order book structure tested is not

identical to the structure ultimately

proposed. If any assumptions made by

the model are not valid, then the results

may not be representative of the impact

of NAqcess on the Nasdaq market.

IV. Conclusion: NAqcess Should Benefit

Investors

NAqcess represents a major

development for the Nasdaq Stock

Market. Its key feature is a central limit

order file with broad access to market

participants. Investors will have the

opportunity to place limit orders

directly into the file, and execute trades

against orders in the file in an

automated fashion. This central order

file will replace the current SelectNet

facility. The automated execution

system, fully consistent with the firm

quote rule, will allow investors to

execute market orders without need of

explicit market maker interaction. This

system will replace the current SOES

facility.

Nasdaq staff believe that NAqcess will

represent a significant benefit for

investors, as enhanced capabilities for a

limit order-oriented market modality are

created. This determination is amply

supported by the global experience of

equity trading, by economic theory and

evidence, by the current experience

within the Nasdaq market, and by

research conducted by and for the

NASD’s Department of Economic

Research.

As has been the experience with the

Paris Bourse, however, the dealeroriented market modality has distinct

advantages of its own. NAqcess is in no

way intended to replace the dealer

market. It can be expected that some

issues will tend to be traded within

NAqcess more than others, and that

some types of trades will be more likely

to be placed on NAqcess than others.

The forces of competition will

ultimately determine the usage of the

various modalities offered within the

Nasdaq Stock Market.

[FR Doc. 96–15448 Filed 6–19–96; 8:45 am]

BILLING CODE 8010–01–P

[Release No. 34–37310; File No. SR–NASD–

96–15]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Granting Approval

to Proposed Rule Change Relating to

Schedule A to the By-Laws to Amend

the Allowable Exclusions and

Deductions from the Definition of

Gross Revenue for Member

Assessment Purposes

June 13, 1996.

On April 4, 1996, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) submitted

to the Securities and Exchange

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

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

Securities Exchange Act of 1934

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

proposed rule change to amend the

allowable exclusions and deductions

from the definition of gross revenue for

member assessment purposes.

The proposed rule change was

published for comment in Securities

Exchange Act Release No. 37169 (May 6,

1996), 61 FR 21517 (May 10, 1996). No

comments were received on the

proposal. This order approves the

proposed rule change.

I. Background

Gross revenue is defined for member

assessment purposes under Section 5 of

Schedule A of the NASD By-Laws

(‘‘Section 5’’) as total income reported

on FOCUS form Part II or IIA, with

certain limited exclusions and

deductions.3 Currently, Section 5

provides that revenue derived from

interest and dividends 4 may be

excluded by a member from gross

revenue for assessment purposes.

II. Description of Proposal

The Association’s proposal amends

Section 5 to remove interest and

dividends as an allowable exclusion for

assessment purposes. The proposal,

however, adds a new provision to allow

a member to deduct from gross revenue

for assessment purposes either: (i) its

interest and dividend expenses, but not

in excess of related interest and

dividend revenue; or, alternatively, (ii)

40% of interest earned by the member

on customer securities accounts. The

proposal also allows a member to

deduct from its gross revenue an

additional $50,000 of net interest and

dividend revenue. Lastly, the proposal

amends Section 5 to provide

alphabetical references to its two

primary subsections and to replace all

bullets referencing its secondary

subsections with numerical references.

The proposed rule will take effect for

the 1996 assessment based on revenues

generated in calendar year 1995. Based

on its data, the NASD estimates that the

proposed rule, if it had been adopted for

1995, would have generated assessment

revenue of $3 million based on the

budgeted level of assessment revenue of

$39 million for that year. Therefore, the

NASD believes that the rule proposal
Federal Register / Vol. 61, No. 120 / Thursday, June 20, 1996 / Notices 31605

5 15 U.S.C. § 78o–3(b)(5).

6 15 U.S.C. § 78s(b)(2) (1988).

will raise the requisite funds to finance

its operating costs.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to the Association, and, in

particular, with the requirements of

Section 15A(b)(5).5 Section 15A(b)(5)

requires that the rules of the Association

provide for the equitable allocation of

reasonable dues, fees, and other charges

among members.

The Commission believes that using a

member’s gross revenue for assessment

purposes provides for the equitable

allocation of reasonable assessments

among members. The Commission notes

that the rule proposal recognizes

interest and dividend revenue as part of

a member’s gross revenue for

assessment purposes, while recognizing

that expenses incurred in connection

with such interest and dividend revenue

should be allowed to be deducted from

such revenue. Moreover, the rule

proposal allows, alternatively, members

whose business incurs less direct

expense in connection with interest and

dividend revenue to deduct 40% of

interest earned by the member on

customer securities accounts. This

alternative deduction is intended to

eliminate the potential for inequitable

allocation of assessments on those

members whose interest and dividend

revenue is obtained without significant

expenses related to trading strategies,

such as a member that derives interest

revenue primarily from margin accounts

financed by its own capital. The

purposed rule also allows a member to

deduct from its gross revenue an

additional $50,000 of net interest and

dividend revenue to encourage the

accumulation of net capital.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,6 that the

proposed rule change (SR–NASD–96–

15) is approved.

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. 96–15660 Filed 6–19–96; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster Loan Area #2865]

Texas; Declaration of Disaster Loan

Area

Irion County and the contiguous

counties of Crockett, Reagan,

Schleicher, and Tom Green constitute a

disaster area as a result of damages

caused by severe thunderstorms and

hail that occurred on May 29, 1996.

Applications for loans for physical

damage as a result of this disaster may

be filed until the close of business on

August 9, 1996 and for economic injury

until the close of business on March 10,

1997 at the address listed below:

U.S. Small Business Administration,

Disaster Area 3 Office, 4400 Amon

Carter Blvd., Suite 102, Fort Worth,

Texas 76155

or other locally announced locations.

The interest rates are:

For Physical Damage: Percent

Homeowners with credit

available elsewhere ........... 7.625

Homeowners without credit

available elsewhere ........... 3.875

Businesses with credit available elsewhere ................... 8.000

Businesses and non-profit

organizations without

credit available elsewhere 4.000

Others (including non-profit

organizations) with credit

available elsewhere ........... 7.125

For Economic Injury:

Businesses and small agricultural cooperatives without credit available elsewhere ................................. 4.000

The number assigned to this disaster

for physical damage is 286511. For

economic injury the number is 894500.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008)

Dated: June 10, 1996.

John T. Spotila,

Acting Adminstrator.

[FR Doc. 96–15721 Filed 6–19–96; 8:45 am]

BILLING CODE 8025–01–P

[Declaration of Disaster Loan Area #2866]

Texas; Declaration of Disaster Loan

Area

Howard County and the contiguous

counties of Borden, Dawson, Glasscock,

Martin, Mitchell, Scurry, and Sterling

constitute a disaster area as a result of

damages caused by severe

thunderstorms and hail that occurred

May 10 through 13, 1996. Applications

for loans for physical damage may be

filed until the close of business on

August 9, 1996 and for economic injury

until the close of business on March 10,

1997 at the address listed below:

U.S. Small Business Administration,

Disaster Area 3 Office, 4400 Amon

Carter Blvd., Suite 102, Fort Worth,

Texas 76155

or other locally announced locations.

The interest rates are:

For Physical Damage: Percent

Homeowners with credit

available elsewhere ........... 7.625

Homeowners without credit

available elsewhere ........... 3.875

Businesses with credit available elsewhere ................... 8.000

Businesses and non-profit

organizations without

credit available elsewhere 4.000

Others (including non-profit

organizations) with credit

available elsewhere ........... 7.125

For Economic Injury:

Businesses and small agricultural cooperatives without credit available elsewhere ................................. 4.000

The number assigned to this disaster

for physical damage is 286611. For

economic injury the number is 894600.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008)

Dated: June 10, 1996.

John T. Spotila,

Acting Administrator.

[FR Doc. 96–15722 Filed 6–19–96; 8:45 am]

BILLING CODE 8025–01–P

Revocation of License of Small

Business Investment Company

Pursuant to the authority granted to

the United States Small Business

Administration by the Order of the

United States District Court for the

Southern District of Texas, dated

December 15, 1995, the United States

Small Business Administration hereby

revokes the license of First City Capital

Corporation, a Texas corporation, to

function as a small business investment

company under the Small Business

Investment Company License No. 06/

10–0022 issued to First City Capital

Corporation on August 26, 1960 and

said license is hereby declared null and

void as of March 28, 1996.

Dated: June 14, 1996.

United States Small Business

Administration.

Don A. Christensen,

Associate Administrator for Investment.

[FR Doc. 96–15786 Filed 6–22–96; 8:45 am]

BILLING CODE 1555–07–P