[Federal Register Volume 60, Number 193 (Thursday, October 5, 1995)]
[Notices]
[Pages 52241-52242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24792]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36292; File No. SR-NASD-95-43]
Self-Regulatory Organizations; Notice and Order Granting
Accelerated Approval of Proposed Rule Change by the National
Association of Securities Dealers, Inc. Relating to an Interim
Extension of the OTC Bulletin Board Service Through June 30,
1996
September 28, 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
September 28, 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 1, and II, 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 and is
simultaneously approving the proposal.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
On June 1, 1990, the NASD, through a subsidiary corporation,
initiated operation of the OTC Bulletin Board Service (``OTCBB
Service'' or ``Service'') in accord with the Commission approval of
File No. SR-NASD-88-19, as amended.\1\ The OTCBB Service provides a
real-time quotation medium that NASD member firms can elect to use to
enter, update, and retrieve quotation information (including unpriced
indications of interest) for securities traded over-the-counter that
are not listed on The Nasdaq Stock Market SM nor on a registered
national securities exchange (collectively referred to as ``OTC
Equities'').\2\ Essentially, the Service supports NASD members' market
making in OTC Equities through authorized Nasdaq Workstation
units. Real-time access to quotation information captured in the
Service is available to subscribers of Level 2/3 Nasdaq service as well
as subscribers of vendor-sponsored services that now carry OTCBB
Service data. The Service is currently operating under an interim
approval that expires on September 28, 1995.\3\
\1\ Securities Exchange Act Release No. 27975 (May 1, 1990), 55
FR 19124.
\2\ With the Commission's approval of File No. SR-NASD-93-24,
the universe of securities eligible for quotation in the OTCBB now
includes certain equities listed on regional stock exchanges that do
not qualify for dissemination of transaction reports via the
facilities of the Consolidated Tape Association.
\3\ Securities Exchange Act Release No. 35918 (June 29, 1995),
60 FR 35443, (July 7, 1995).
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The NASD hereby files this proposed rule change, pursuant to
Section 19(b)(1) of the Act and Rule 19b-4 thereunder, to obtain
authorization for an interim extension of the Service through June 30,
1996. During this interval, there will be no material change in the
OTCBB Service's operational features, absent Commission approval of a
corresponding Rule 19b-4 filing.
II. Self-Regulatory Organizations' 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 this filing is to ensure continuity in the operation
of the OTCBB Service while the Commission considers an earlier NASD
rule filing (File No. SR-NASD-92-7) that requested permanent approval
of the Service.\4\ For the month ending August, 1995, the Service
reflected the market making positions of 382 NASD member firms
displaying quotations/indications of interest in approximately 5,344
OTC Equities.
\4\ Securities Exchange Act Release No. 30766 (June 1, 1992), 57
FR 24281.
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During the proposed extension, unregistered foreign securities and
American Depository Receipts (collectively, ``Foreign Equity
Securities'') will remain subject to the twice-daily, update limitation
that traces back to the Commission's original approval of the OTCBB
Service's operation. As a result, all priced bids/offers displayed in
the Service for unregistered Foreign Equity Securities will remain
indicative. During the period of the extension, the NASD may allow
member firms to publish such priced bids/offers on any Foreign Equity
Security that otherwise qualifies for inclusion in the OTCBB service.
In conjunction with the launch of the Service in 1990, the NASD
implemented a filing requirement (under Section 4 of Schedule H to the
NASD By-Laws) and review procedures to verify member firms' compliance
with Rule 15c2-11 under the Act. During the proposed extension, this
review process will continue to be an important component of the NASD's
self-regulatory oversight of broker-dealers' market making in OTC
Equities. The NASD also expects to work closely with the Commission
staff in developing further enhancements to the Service to fulfill the
market structure requirements mandated by the Securities Enforcement
Remedies and Penny Stock Reform Act of 1990 (``Reform Act''),
particularly Section 17B of the Act.\5\ The NASD notes that
implementation of the Reform Act entails Commission rulemaking in
several areas, including the development of mechanisms for gathering
and disseminating reliable quotation/transaction information for
``penny stocks''.
\5\ On November 24, 1992, the NASD filed an application with the
Commission for interim designation of the Service as an automated
quotation system for penny stocks, pursuant to Section 17B(b) of the
Act. On December 30, 1992, the Commission granted Qualifying
Electronic Quotation System (``QEQS'') status for the Service for
purposes of certain penny stock rules that became effective on
January 1, 1993. On August 26, 1993, the Commission granted the
NASD's request for an extension of QEQS status until such time as
the OTCBB meets the statutory requirements of Section 17B(b)(2).
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* * * * *
The NASD believes that this proposed rule change is consistent with
Sections 11A(a)(1), 15A(b)(6) and (11), and 17B of the Act. Section
11A(a)(1) sets forth the Congressional findings and policy goals
respecting operational enhancements to the securities markets.
Basically, the Congress found that new data processing and
communications techniques should be applied to improve the efficiency
of market operations, broaden the distribution of market information,
and foster competition among market participants. Section 15A(b)(6)
requires, among other things, that the NASD's rules promote just and
equitable principles of trade, facilitate securities transactions, and
protect public investors. Subsection (11) thereunder authorizes the
NASD to adopt rules governing the form and content of quotations for
securities traded over-the-counter for the purposes of producing fair
and informative quotations, preventing misleading
[[Page 52242]]
quotations, and promoting orderly procedures for collecting and
disseminating quotations. Finally, Section 17B contains Congressional
findings and directives respecting the collection and distribution of
quotation information on low-priced equity securities that are neither
Nasdaq nor exchange-listed.
The NASD believes that extension of the Service through June 30,
1996 is fully consistent with the foregoing provisions of the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The NASD believes that the 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 NASD requests that the Commission find good cause, pursuant to
Section 19(b)(2) of the Act, for approving the proposed rule change
prior to the 30th day after its publication in the Federal Register to
avoid any interruption of the Service. The current authorization for
the Service extends through September 28, 1995. Hence, it is imperative
that the Commission approve the instant filing on or before that date.
Otherwise, the NASD will be required to suspend operation of the
Service pending Commission action on the proposed extension.
The NASD believes that accelerated approval is appropriate to
ensure continuity in the Service's operation pending a determination on
permanent status for the Service, as requested in File No. SR-NASD-92-
7. Continued operation of the Service will ensure the availability of
an electronic quotation medium to support member firms' market making
in approximately 5,344 OTC Equities and the widespread dissemination of
quotation information on these securities. The Service's operation also
expedites price discovery and facilitates the execution of customer
orders at the best available price. From a regulatory standpoint, the
NASD's capture of quotation data from participating market makers
supplements the transactional data now reported by member firms
pursuant to Part XII of Schedule D to the NASD By-Laws.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submission
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 the 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-95-43 and
should be submitted by October 26, 1995.
V. Commission's Findings and Order Granting Accelerated Approval
The Commission finds that approval of the proposed rule change is
consistent with the Act and the rules and regulations thereunder, and
in particular with the requirements of Section 15A(b)(11) of the Act,
which provides that the rules of the NASD relating to quotations must
be designated to produce fair and informative quotations, prevent
fictitious or misleading quotations and promote orderly procedures for
collecting, distributing, and publishing quotations.
The Commission finds good cause for approving the proposed rule
change prior to the 30th day after the date of publishing notice of the
filing thereof. Accelerated approval of the NASD's proposal is
appropriate to ensure continuity in the Service's operation as an
electronic quotation medium that supports NASD members' market making
in OTC Equities and that facilitates price discovery and the execution
of customers' orders at best available price. Additionally, continued
operation of the Service will materially assist the NASD's surveillance
of trading in OTC Equities that are quoted in the Service, including
certain non-Tape B securities that are listed on regional exchanges and
quoted in the Service.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change be, and hereby is, approved for an
interim period through June 30, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
\6\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-24792 Filed 10-4-95; 8:45 am]
BILLING CODE 8010-01-M
