97-12889. Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the National Association of Securities Dealers, Inc., Relating to an Amendment to the NASD's Rule Governing Market Maker Registration  

  • [Federal Register Volume 62, Number 95 (Friday, May 16, 1997)]
    [Notices]
    [Pages 27094-27095]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 97-12889]
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    
    [Release No. 34-38610; File No. SR-NASD-97-31]
    
    
    Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
    Change by the National Association of Securities Dealers, Inc., 
    Relating to an Amendment to the NASD's Rule Governing Market Maker 
    Registration
    
    May 12, 1997.
        Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
    (``Act''), 15 U.S.C. 78s(b)(1), and the National Association of 
    Securities Dealers, Inc.'s (``NASD'' or ``Association'') Plan of 
    Allocation and Delegation of Functions by NASD to Subsidiaries, notice 
    is hereby given that on April 24, 1997, The Nasdaq Stock Market, Inc. 
    (``Nasdaq'') 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 Nasdaq. 
    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
    
        Nasdaq proposes to amend NASD Rule 4611(d) to permit managers and 
    co-managers of an underwriting syndicate participating in a secondary 
    offering of a security listed and traded on Nasdaq to register as a 
    market maker in such issue on a same-day basis on the day of the 
    secondary offering. (Additions are italicized; deletions are 
    bracketed.)
    * * * * *
    NASD Rule 4611
        (a)-(c) No change.
        (d) A Nasdaq market maker may become registered in an issue already 
    included in Nasdaq by entering a registration request via a Nasdaq 
    terminal. If registration is requested in an issue that has been 
    included in Nasdaq for more than five (5) days, and the requirements of 
    paragraph (b) above are satisfied, registration shall become effective 
    on the day after the registration request is entered. Provided, [If] 
    however, that same day registration is permissible for:
        (1) a Nasdaq market maker, registered in a security that is the 
    subject of a publicly announced merger or acquisition offer with 
    another Nasdaq issue, who seeks registration in the other merger or 
    acquisition issue; [, same-day registration is permissible.]; and
    
    [[Page 27095]]
    
        (2) a manager or co-manager of an underwriting syndicate for a 
    secondary offering of a security on the day of the secondary offering 
    of that security.
        (e)-(g) No change.
    * * * * *
    
    II. Self-Regulatory Organization's Statement of the Purpose of, and 
    Statutory Basis for, the Proposed Rule Change
    
        In its filing with the Commission, Nasdaq 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. Nasdaq 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
    
        NASD Rule 4611(d) provides that an NASD member may register as a 
    Nasdaq market maker in an issue by entering a registration request 
    ``on-line'' via a Nasdaq terminal. For issues that have been trading on 
    Nasdaq for more than five days, however, ``on-line'' registrations are 
    not effective until the day after the registration request is made 
    (``One-Day Delay Rule''). This one-day delay for market maker 
    registration in non-IPOs is designed to minimize the potential for 
    ``fair weather'' market making. Specifically, the one-day delay helps 
    to assure that members registering as market makers are making a 
    legitimate commitment of their capital to the issue for the betterment 
    of the market, not just to capture short-term trading profits during 
    brief periods of favorable market conditions.
        While Nasdaq continues to believe that the one-day delay in market 
    maker registration serves to minimize the potential for ``fair 
    weather'' market makers, there have been instances where managers and 
    co-managers of an underwriting syndicate for a secondary offering have 
    been precluded from trading the issue on the day of the secondary 
    offering because they did not submit a market maker registration 
    request on the day before the offering. Accordingly, in light of the 
    inherent commitment of managers and co-managers of underwriting 
    syndicates to their issues, the need for these members to make a market 
    in the stock to manager their risk, and the additional liquidity and 
    pricing efficiency that these market makers can provide, Nasdaq is 
    proposing to amend NASD Rule 4611(d) to permit managers and co-managers 
    of a secondary offering to register in that issue on a same-day basis 
    on the day of the secondary offering.
        Nasdaq believes the proposed rule change is consistent with Section 
    15A(b)(6) of the Act. Section 15A(b)(6) requires that the rules of a 
    national securities association be designed to prevent fraudulent and 
    manipulative acts and practices, to promote just and equitable 
    principles of trade, to foster cooperation and coordination with 
    persons engaged in regulating, clearing, settling, processing 
    information with respect to, and facilitating transactions in 
    securities, to remove impediments to and perfect the mechanism of a 
    free and open market and a national market system and in general to 
    protect investors and the public interest. Specifically, by permitting 
    managers and co-managers of secondary offerings to become registered 
    market makers in such issues on the day of the secondary offering, 
    Nasdaq believes the proposal will enhance the liquidity and stability 
    of the market, facilitate greater market maker competition, and promote 
    the capital formation process by enabling managers and co-managers of 
    secondary offerings to better manage their risks associated with the 
    offering. At the same time, given the inherent commitment of managers 
    and co-managers to the stocks they underwrite, Nasdaq does not believe 
    that permitting managers and co-managers of secondary offerings to 
    register in such issues on a same-day basis on the day of the offering 
    will compromise the regulatory purposes underlying the ``One-Day Delay 
    Rule.''
    
    B. Self-Regulatory Organization's Statement on Burden on Competition
    
        Nasdaq 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
    
        Comments were neither solicited nor received.
    
    III. Date of Effectiveness of the Proposed Rule Change and Timing for 
    Commission Action
    
        Within 35 days of the date of publication of this notice in the 
    Federal Register or within such longer period (i) as the Commission may 
    designate up to 90 days of such date if it finds such longer period to 
    be appropriate and publishes its reasons for so finding or (ii) as to 
    which the NASD consents, the Commission will:
        A. By order approve such proposed rule change, or
        B. Institute proceedings to determine whether the proposed rule 
    change should be disapproved.
    
    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 file number SR-NASD-97-31 and 
    should be submitted by June 6, 1997.
    
        For the Commission, by the Division of Market Regulation, 
    pursuant to delegated authority (17 CFR 200.30-3(a)(12) (1989)).
    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. 97-12889 Filed 5-15-97; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
05/16/1997
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
97-12889
Pages:
27094-27095 (2 pages)
Docket Numbers:
Release No. 34-38610, File No. SR-NASD-97-31
PDF File:
97-12889.pdf