[Federal Register Volume 63, Number 61 (Tuesday, March 31, 1998)]
[Notices]
[Pages 15471-15472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8317]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39794; File No. SR-NASD-98-17]
Self-Regulatory Organizations; Notice of Extension of the Comment
Period for the Proposed Rule Change by the National Association of
Securities Dealers, Inc. Relating to an Integrated Order Delivery and
Execution System
March 25, 1998.
On February 19, 1998, the National Association of Securities
Dealers, Inc. (``NASD''), through its wholly-owned subsidiary, The
Nasdaq Stock Market, Inc. (``Nasdaq''), filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') a series of proposed
rule changes.\1\ The NASD is proposing new rules and amendments to
existing NASD rules to establish an integrated order delivery and
execution system (``System'').
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\1\ Exchange Act Release No. 39718 (March 4, 1998) 63 FR 12124
(March 12, 1998) (File No. SR-NASD-98-17). As originally noticed,
the comment period ran through April 2, 1998.
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As proposed, the new System will have three types of registered
executing participants (as it does currently): market makers,
electronic communication networks (``ECNs''), and UTP exchange
specialists. Executing participants' quotes will be displayed on Nasdaq
workstations, disseminated through information vendors, and accessible
by System participants. Registered NASD members, and certain customers
they sponsor, will be able to deliver various sized orders (up to
999,999 shares, if the Actual Size Rule is expanded to all Nasdaq
stocks \2\ through the new System to electronically access the
displayed quotations.
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\2\ The Actual Size Rule allows market makers to quote their
actual size by reducing the minimum quotation size requirement to
one normal unit of trading (i.e., 100 shares). The Actual Size Rule
currently applies to 150 Nasdaq stocks on a pilot basis. The NASD
has filed a proposal to expand the pilot program to cover all Nasdaq
stocks permanently. See Exchange Act Release No. 39760 (March 16,
1998) 63 FR 13894 (March 23, 1998).
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The System features a voluntary central limit order file that all
market participants will be able to access either directly or through a
System participant. System participants will be able to send
[[Page 15472]]
directed (i.e., to a particular market maker) or non-directed orders.
Orders will remain anonymous until they are executed. The System will
replace the Small Order Execution System (``SOES'') and SelectNet (and
related NASD rules), while maintaining features of each. Primary market
makers will be able to sponsor other firms (e.g., institutions), giving
them System access.
As proposed, the System would operate differently depending on
whether the Commission approves the NASD's request to permit Market
Makers to quote their actual size for all Nasdaq stocks.\3\ If the
Actual Size Rule is not extended to all Nasdaq stocks, the Nasdaq
proposes that nonmarket makers will not be permitted to enter orders
larger than 1,000 shares for non-directed orders, and that the SOES
prohibition on splitting orders and the Five Minute Rule (i.e., any
orders sent within a five minute period are considered part of one
order) will be retained. Also, if Actual Size is not expanded to cover
all Nasdaq stocks, the NASD proposes that non-market makers be
prohibited from entering principal orders. Finally, if Actual Size is
approved for all Nasdaq stocks, the order splitting and Five Minute
Rules will not apply.
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\3\ Id.
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Under the proposal, market makers will no longer be ``SOESed-Out-
of-the-Box'' when they allow their quote size to be diminished to
zero.\4\ Instead, the NASD proposes that after three (rather than the
current five) minutes, a firm that is effectively out of the market
(i.e., has not refreshed its quote) will be automatically reestablished
at the lowest ranked bid and offer for 1,000 shares.
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\4\ See Exchange Act Release No. 39423 (December 10, 1997) 62 FR
66160 (December 17, 1997).
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Given the proposal's complexity and the Commission's desire to give
the public sufficient time to consider the proposal, the NASD has
consented to extend the comment period to May 8, 1998.\5\
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\5\ See letter from Richard G. Ketchum, President and Chief
Operating Officer, Nasdaq, to Katherine A. England, Assistant
Director, Division of Market Regulation, SEC, dated March 24, 1998.
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Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Exchange Act. Persons making written
submissions 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 ruld 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 File No.
SR-NASD-98-17 and should be submitted by May 8, 1998.
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. 98-8317 Filed 3-30-98; 8:45 am]
BILLING CODE 8010-01-M
