[Federal Register Volume 60, Number 226 (Friday, November 24, 1995)]
[Notices]
[Pages 58119-58120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28621]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36481; File No. S7-24-89]
Joint Industry Plan; Solicitation of Comments and Order Partially
Approving Amendment No. 6 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
November 13, 1995.
On November 13, 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. 6 to a joint transaction reporting
plan (``Plan'') for Nasdaq/National Market securities traded on an
exchange on an unlisted or listed basis.\2\ The Commission is approving
the proposed amendment to the Plan insofar as the proposal requests an
extension of the effectiveness of the Plan. The Commission, however, is
partially approving the proposal by approving operation of the Plan and
trading pursuant to the Plan on a temporary basis to expire on December
12, 1995, and not through the entire period requested which would have
been through December 29, 1995.
\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.), 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\ The Commission notes that Section 12(f) of the Act describes
the circumstances under which an exchange may trade a security that
is not listed on the exchange, i.e., by extending unlisted trading
privileges (``UTP'') to the security. Section 12(f) was amended on
October 22, 1994, 15 U.S.C. Sec. 78l (1991) (as amended 1994). Prior
to the amendment, Section 12(f) required exchanges to apply to the
Commission before extending UTP to any security. In order to approve
an exchange UTP application for a registered security not listed on
any exchange (``OTC/UTP''), Section 12(f) required the Commission to
determine that various criteria had been met concerning fair and
orderly markets, the protection of investors, and certain national
market initiatives. These requirements operated in conjunction with
the Plan currently under review. The recent amendment to Section
12(f), among other matters, removes the application requirement and
permits OTC/UTP only pursuant to a Commission order or rule. The
order or rule is to be issued or promulgated under essentially the
same standards that previously applied to Commission review of UTP
applications. The present order fulfills these Section 12(f)
requirements.
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I. Background
The Commission originally approved the Plan on June 26, 1990.\3\
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 UTP.
The Commission originally approved trading pursuant to the Plan on a
one-year pilot basis, with the pilot period to commence when
transaction reporting pursuant to the Plan commenced. Consequently, the
pilot period commenced on July 12, 1993. As requested by the
Participants in Amendment Nos. 1, 2, 3, 4, and 5 to the Plan, the
Commission has extended the effectiveness of the Plan five times.
Accordingly, the effectiveness of the Plan was scheduled to expire on
November 12, 1995.\4\
\3\ 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 4.
\4\ 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
(``January 1995 Extension Order''), Securities Exchange Act 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''), and
Securities Exchange Act Release No. 36368 (October 13, 1995), 60 FR
54091 (``October 1995 Extension Order'').
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As originally approved by the Commission, the Plan required the
[[Page 58120]]
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, and
since that time the Commission has expected the Participants to
conclude their financial negotiations promptly (at that time, before
January 31, 1995), and to submit a filing to the Commission that
reflected the results of the negotiations.\5\ To date, the Participants
have not completed their financial negotiations.
\5\ See January 1995 Extension Order, id, at n. 6.
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Proposed Amendment No. 6 to the Plan would have extended the
effectiveness and the negotiation period through December 29, 1995. In
light of the lack of progress that has been made by the Participants in
finalizing their negotiations, as evidenced by their failure to file a
proposed amendment for revenue sharing under the Plan, the Commission
believes it is appropriate only to approve the proposal partially by
extending the effectiveness of the pilot program for an additional
month. This should serve to continue the pilot program in place while
the Commission awaits the requisite filing.\6\
\6\ The NASD, in its letter attached to the present filing,
states that all Plan Participants have made a good faith effort to
reach a final agreement on revenue sharing under the Plan, but that
the Chx has requested a limited amount of time to conclude
internally its consideration of the most recent draft of the
financial plan amendment. See letter from Robert E. Aber, NASD, to
Jonathan Katz, Commission, dated November 9, 1995. The Participants
are reminded that they currently are in violation of the
Commission's August 1995 Extension Order that required the
Participants to submit a filing concerning revenue sharing on or
before August 31, 1995. The Commission continues to urge the
Participants to comply with the Commission's request for the filing
promptly.
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II. Extension of Certain Exemptive Relief
In conjunction with the Plan, on a temporary basis scheduled to
expire on November 12, 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.
While the Participants have requested that these exemptions be extended
through December 29, 1995, this order extends these exemptions only
through December 12, 1995. Further, this extension will remain in
effect only if the Plan continues in effect through that date pursuant
to a Commission order.\7\ The Commission continues to believe that
exemptive relief from these provisions is appropriate through December
12, 1995.
\7\ In the October 1995 Extension Order, the Commission extended
these exemptions from October 12, 1995, through November 12, 1995.
Pursuant to a request made by the NASD, this order further extends
the effectiveness of the relevant exemptions but only from October
12, 1995, through November 12, 1995. See letter dated November 9,
1995, id.
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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, and the October 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 Comment
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. 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 December 15, 1995.
V. Conclusion
The Commission finds that proposed Amendment No. 6 to the Plan to
extend the operation of the Plan and the financial negotiation period,
but only for an additional month, is appropriate and in furtherance of
Section 11A of the Act. The Commission finds further that extensions of
the exemptive relief through December 12, 1995, 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 with more information to evaluate the effects of and
proposed course of action for the pilot program. 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.
The Commission currently believes, however, that extension beyond
December 12, 1995, of the effectiveness of the Plan and the related
exemptive relief is not necessary or in furtherance of the Act because
such an extension would not maximize the incentives for the
Participants to complete their negotiations and file a financial
amendment to the Plan, as described above. Thus, the Commission
believes that partial approval of the proposal by limiting the
effectiveness of the present approval order through December 12, 1995,
is appropriate.
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. 6 to the
Joint Transaction Reporting Plan for Nasdaq/National Market securities
traded on an exchange on an unlisted or listed basis is hereby
partially approved and trading pursuant to the Plan is hereby approved
on a temporary basis through December 12, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(29).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-28621 Filed 11-22-95; 8:45 am]
BILLING CODE 8010-01-M
