[Federal Register Volume 61, Number 246 (Friday, December 20, 1996)]
[Notices]
[Pages 67372-67373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32334]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38052; File No. SR-NASD-96-40]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the National Association of Securities Dealers, Inc. Amending
the Inclusion Criteria for the Supplemental List of the Mutual Fund
Quotation Service
December 16, 1996.
On October 18, 1996, the National Association of Securities
Dealers, Inc. (``NASD'' or ``Association'') filed with the Securities
and Exchange Commission (``SEC'' or ``Commission'') the proposed rule
change pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934 (``Act'') \1\, and Rule 19B-4 thereunder.\2\ The proposed rule
change amends NASD Rule 6800 to provide new criteria to permit smaller
mutual funds and money market funds to disseminate their prices via the
Mutual Fund Quotation Service (``Service''). Notice of the proposed
rule change, together with the substance of the proposal, was published
in the Federal Register.\3\ No comment letters were received. The
Commission is approving the proposed rule change.
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\1\ 15 U.S.C. Sec. 78s(b)(1).
\2\ 17 CFR 240.19b-4
\3\ Securities Exchange Act Release No. 37922 (November 5,
1996), 61 FR 58271 (November 13, 1996).
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I. Background
The Service provides for the collection and dissemination of prices
for both mutual funds and money market funds. The Service consists of
two lists: the News Media List and the Supplemental List. The News
Media List,\4\ which is not being amended by this rule filing, consists
of data on more than 6,000 funds which Nasdaq distributes daily to
newspapers and to vendors through its Level 1 Service.
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\4\ The criteria for inclusion in the News Media List are: (1)
for initial inclusion--at least 1,000 shareholders or $25 million in
net assets; (2) for continued inclusion--at least 750 shareholders
or $15 million in net assets.
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Eligible funds that do not qualify for the News Media List have
been eligible for price dissemination solely through the Level 1
Service. The criteria for inclusion in this list of smaller funds has
been a size test, requiring 300 fund shareholders at the time of
initial application for inclusion in the Supplemental List. According
to the Investment Company Institute (``ICI''), approximately 2,100
funds do not qualify for either the News Media or Supplemental Lists.
In the course of discussions with ICI, the Nasdaq determined that,
while many smaller funds may have smaller numbers of beneficial owners
that keep such funds from meeting the 300 shareholder test, the same
funds often have substantial net assets. Because these funds do not
qualify for the Nasdaq Stock Market, Inc. (``Nasdaq'') Service, these
smaller funds do not have a centralized means of disseminating their
prices to broker-dealers, rating services and individual investors.
Instead, these funds distribute their prices to various entities by fax
or telephone.
II. The Terms of Substance of the Proposed Rule Change
The proposed rule change amends NASD Rule 6800 to revise the
Service's Supplemental List criteria to delete the requirement that a
fund have 300 shareholders and replace it with two alternative
standards. First, a mutual fund may meet the Supplemental List
inclusion standard if the fund has net assets at the time of
application of $10 million or more. In the alternative, a fund would
qualify regardless of net assets or shareholder members if it has
operated for two full years.
III. Discussion
The Commission believes that the proposed rule change is consistent
with the provisions of Section 15A(b)(6) of the Act in that it promotes
better processing of pricing information in securities, protects
investors and the public interest, and is designed to produce fair and
informative prices for smaller mutual funds. The Association has
represented that the new informative prices for smaller mutual funds.
The Association has represented that the new Supplemental List criteria
for the Service should permit approximately 1,400 more funds to provide
Nasdaq with price information through its Level 1 Service, which is
distributed over more than 280,000 terminals. Because of the present
inefficiencies, costs, and lack of transparency associated with
communicating by fax or telephone, the Commission believes that
distribution of Net Asset Value information for smaller fund through
the Service significantly aids investors in such funds. The Commission
believes that the Service promotes efficient, centralized dissemination
of critical information to a wide audience, and thereby promotes the
transparency of smaller funds prices. Furthermore, the Commission
believes the Service may help the affected funds reduce the costs
associated with distributing Net Asset Value information to various
entities by fax or telephone.
[[Page 67373]]
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\5\ that the proposed rule change SR-NASD-96-40 be, and hereby is,
approved.
\5\ 15 U.S.C. Sec. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-32334 Filed 12-19-96; 8:45 am]
BILLING CODE 8010-01-M
