[Federal Register Volume 60, Number 197 (Thursday, October 12, 1995)]
[Notices]
[Pages 53223-53224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25251]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36336; File No. SR-NASD-95-44]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by National Association of
Securities Dealers, Inc. Relating to Small Order Execution System Tier
Size Classifications
October 4, 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 October
2, 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 is submitting this filing to effectuate The Nasdaq Stock
Market, Inc.'s (``Nasdaq'') periodic reclassification of Nasdaq
National Market (``NNM'') securities into appropriate tier sizes for
purposes of determining the maximum size order for a particular
security eligible for execution through Nasdaq's Small Order Execution
System (``SOES'') and the minimum quote size requirements for Nasdaq
market makers in NNM securities. Specifically, under the proposal, 900
NNM securities will be reclassified into a different SOES tier size
effective November 13, 1995. Since the NASD's proposal is an
interpretation of existing NASD rules, there are no language changes.
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
The purpose of the rule change is to effectuate Nasdaq's periodic
reclassification of NNM securities into appropriate tier sizes for
purposes of determining the maximum size order for a particular
security eligible for execution through SOES and the minimum quote size
requirements for Nasdaq market makers in NNM securities. Nasdaq
periodically reviews the SOES tier size applicable to each NNM security
to determine if the trading characteristics of the issue have changed
so as to warrant a tier size adjustment. Such a review was conducted as
of March 31, 1995, using the following established criteria:\1\
\1\The classification criteria is set forth in footnote 1 to
Section (a)(7) of the SOES Rules and Section 2(a) of Part V of
Schedule D to the NASD By-Laws.
[[Page 53224]]
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NNM securities with an average daily non-block volume of 3,000
shares or more a day, a bid price less than or equal to $100, and
three or more market makers are subject to a minimum quotation size
requirement of 1,000 shares;\2\
\2\On December 23, 1993, the Securities and Exchange Commission
approved a reduction in the maximum SOES tier size to 500 shares
from 1,000 shares on an interim basis. See Securities Exchange Act
Release No. 33377 (Dec. 23, 1993), 58 FR 69419. On March 28, 1995,
the effectiveness of this rule lapsed and the largest SOES tier size
returned to 1,000 shares.
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NNM securities with an average daily non-block volume of 1,000
shares or more a day, a bid price less than or equal to $150, and
two or more market makers are subject to a minimum quotation size
requirement of 500 shares and a maximum SOES order size of 500
shares; and
NNM securities with an average daily non-block volume of less
than 1,000 shares a day, a bid price less than or equal to $250, and
less than two market makers are subject to a minimum quotation size
requirement of 200 shares and a maximum SOES order size of 200
shares.
Pursuant to the application of this classification criteria, 900
NNM securities will be reclassified effective November 13, 1995. These
900 NNM securities are set out in the NASD's Notice To Members 95-91
(October, 1995).
In ranking NNM securities pursuant to the established
classification criteria, Nasdaq followed the changes dictated by the
criteria with two exceptions. First, an issue was not moved more than
one tier size level. For example, if an issue was previously
categorized in the 1,000-share tier size, it would not be permitted to
move to the 200-share tier even if the reclassification criteria showed
that such a move was warranted. In adopting this policy, Nasdaq was
attempting to maintain adequate public investor access to the market
for issues in which the tier size level decreased and help ensure the
ongoing participation of market makers in SOES for issues in which the
tier size level increased. Second, for twenty securities priced below
$1 where the reranking called for a reduction in tier size, Nasdaq
determined not to recommend a decline in tier size.\3\
\3\In addition, 33 of the NNM securities subject to the SOES
tier size reranking procedures on March 31, 1995 are no longer NNM
securities.
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The NASD believes that the proposed rule change is consistent with
Section 15A(b)(6) of the Act. Section 15A(b)(6) requires, among other
things, that the rules of the NASD governing the operation of The
Nasdaq Stock Market be designed to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market. The NASD believes that the reassignment of NNM
securities within SOES tier size levels and minimum quotation size
levels will further these ends by providing an efficient mechanism for
small, retail investors to execute their orders on Nasdaq and providing
investors with the assurance that they can effect trades up to a
certain size at the quotations displayed on Nasdaq.
(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 the purposes of the Act.
(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
The proposed rule change has become effective immediately pursuant
to Section 19(b)(3)(A)(i) of the Act and subparagraph (e) of Rule 19b-4
thereunder because the reranking of NNM securities into appropriate
SOES tier sizes was done pursuant to the NASD's stated policy and
practice with respect to the administration and enforcement of two
existing NASD rules. Further, in the SOES Tier Size Order, the
Commission requested that the NASD provide this information as an
interpretation of an existing NASD rule under Section 19(b)(3)(A) of
the Act. At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Securities Exchange Act of 1934.
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, N.W., 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 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 No. SR-NASD-95-44 and
should be submitted by November 2, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
\4\17 CFR 200.30-3(a)(12)(1989).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-25251 Filed 10-11-95; 8:45 am]
BILLING CODE 8010-01-M
