[Federal Register Volume 59, Number 192 (Wednesday, October 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24613]
[[Page Unknown]]
[Federal Register: October 5, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34743; File No. SR-NASD-94-48]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by National Association of Securities Dealers, Inc., Relating to
the Amendment of Certain Current Terms and the Adoption of New Terms
Relating to the NASDAQ System That Are Used in Schedule D to the NASD
By-Laws and Other Parts of the NASD's Rules and Regulations That Are
Contained in the NASD Manual
September 28, 1994.
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 20, 1994,\1\ the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association'') filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') the proposed rule
change as described in Items I, II, and III 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.
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\1\The proposed rule change was initially submitted on August
23, 1994, and was amended on September 20, 1994.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Below is the text of the proposed rule change. Proposed new
language is italicized and proposed deletions are bracketed.
SCHEDULE D TO THE NASD BY-LAWS
PART I
DEFINITIONS
* * * * *
(17) [``NASDAQ] ''``Nasdaq market maker'' means a dealer that, with
respect to a security, holds itself out (by entering quotations in [the
NASDAQ System] The Nasdaq Stock Market) as being willing to buy and
sell such security for its own account on a regular and continuous
basis and that is registered as such.
(18) ``Nasdaq National Market'' or ``NNM'' is a distinct tier of
The Nasdaq Stock Market comprised of securities that meet the
requirements of and are authorized as a Nasdaq National Market
security.
[18] (19) [NASDAQ National Market System security'' or ``NASDAQ NMS
security''] ``Nasdaq National Market security'' or ``NNM security''
means any authorized security in the Nasdaq National Market with (i)
satisfies all applicable requirements of Part II and substantially
meets the criteria set forth in Part III [Section 2 and 5] of this
Schedule D and is subject therefore to a transaction reporting plan
approved by the Securities and Exchange Commission; (ii) is a right to
purchase such security; or (iii) is a warrant to subscribe to such
security, and has been designated therefore as a national market system
security pursuant to SEC Rule 11Aa2-1.
(20)``Nasdaq SmallCap Market security'' or ``SCM security'' means
any authorized security in The Nasdaq SmallCap Market which (i)
satisfies all applicable requirements of Part II of this Schedule D
other than a Nasdaq National Market security; (ii) is a right to
purchase such security; or (iii) is a warrant to subscribe to such
security.
[(20)] (21) ``Net Tangible Assets'' shall mean total assets
(including the value of patents, copyrights and trade marks but
excluding the value of goodwill) less total liabilities.
[(21)] (22) ``Normal unit of trading'' means 100 shares of a
security unless, with respect to particular security, the Association
determines that a normal unit of trading shall constitute other than
100 shares. If a normal unit of trading is other than 100 shares, a
special identifier shall be appended to the issuer's [NASDAQ] Nasdaq
symbol.
Sections (22)-(25) are renumbered (23)-(26) respectively.
(27) ``The Nasdaq SmallCap Market'' or ``SCM'' is a distinct tier
of The Nasdaq Stock Market comprised of securities that meet the
requirements of and are authorized as a Nasdaq SmallCap Market
security.
[19] (28) [``NASDAQ System'' means the electronic inter-dealer
quotation system] ``The Nasdaq Stock Market'' or ``Nasdaq'' is an
electronic securities market comprised of competing market makers whose
trading is supported by a communications network linking them to
quotation dissemination, trade reporting, and order execution systems.
This market also provides specialized automation services for screen-
based negotiations of transactions, on-line comparison of transactions,
and a range of informational services tailored to the needs of the
securities industry, investors and issuers. The Nasdaq Stock Market
consists of two distinct market tiers: the ``Nasdaq National Market''
and ``The Nasdaq SmallCap Market''. The Nasdaq Stock Market is operated
by [NASDAQ, Inc.] The Nasdaq Stock Market, Inc., a wholly-owned
subsidiary of the Association.
In addition to the changes listed above, the proposed rule change
would insert the proposed new terms, where applicable, throughout the
NASD Manual. The proposed rule change also would apply to all rule
filings that are approved or pending prior to the Commission's approval
of the proposed rule 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, 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 place 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 NASD is proposing to amend certain current terms and adopt new
terms related to the NASDAQ System that more appropriately describe the
current technological facilities and services provided by this national
securities market throughout Schedule D to the NASD By-Laws)
(``Schedule D'') and other parts of the NASD's rules and regulations in
the NASD Manual. The NASD believes that the proposed new terms will
indicate more clearly the current functionality of the NASDAQ System as
a market for securities with quotation dissemination, trade reporting,
and other execution capability, as well as other specialized automation
services for screen-based negotiations of transactions, on-line
comparison of transactions, and a range of informational services
tailored to the needs of the securities industry, investors and issues.
The proposed new terms would also clarify that the NASDAQ System is
composed of two distinct market tiers, each with different inclusion
criteria that are set forth in different parts of Schedule D. Finally,
the proposed rule change would make clear that The Nasdaq Stock Market
is operated by The Nasdaq Stock Market, Inc., a wholly-owned subsidiary
of the Association.
Section 17 to Part I of Schedule D would be amended to replace the
term ``NASDAQ'' with the term ``Nasdaq'' and to replace the phrase
``the NASDAQ System'' with the term ``The Nasdaq Stock Market''.
The proposed rule change would add a new Section 18 to Part I of
Schedule D to define the ``Nasdaq National Market'' or ``NNM'' to mean
a distinct tier of The Nasdaq Stock Market comprised of securities that
meet the requirements of and are authorized as a Nasdaq National Market
security
Part I, Section 18 of Schedule D would be renumbered as Section 19
and amended to replace the terms ``NASDAQ National Market System
security'' and ``NASDAQ NMS security'' with the terms ``Nasdaq National
Market security'' and ``NNM security'', and to clarify a current NASD
requirement that such securities must satisfy ``all applicable
requirements of Part II'' of Schedule D as well as substantially meet
the criteria set forth Part III of Schedule D. The text of the proposed
rule language to new Section 19 is based on that in Section 1 of Part
II and Section 2 of Part III to Schedule D which set forth the
qualification requirements and designation criteria applicable to
Nasdaq SmallCap Market and Nasdaq National Market securities.
The proposed rule change would add a new Section 20 to Part I of
Schedule D to define the term ``Nasdaq SmallCap Market security'' or
``SCM security'' to mean any security which (i) satisfies all
applicable requirements of Part II of Schedule D other than a Nasdaq
National Market security; (ii) is a right to purchase such security; or
(iii) is a warrant to subscribe to such security.
The current section (20) to Part I of Schedule D would be
renumbered as Section (21). The current section (21) to Part I of
Schedule D would be renumbered as Section (22) and the term ``NASDAQ''
contained therein would be replaced with the term ``Nasdaq''. Current
section (22) to (25) to Part I of Schedule D would be renumbered as
Sections (23) to (26,) respectively.
The proposed rule change would add a new Section 27 to Part I of
Schedule D to define ``The Nasdaq SmallCap Market'' or ``SCM'' to be a
distinct tier of The Nasdaq Stock Market comprised of securities that
meet the requirements of and are authorized as a Nasdaq SmallCap Market
security.
The current Section 19 to Part I of Schedule D would be renumbered
as Section 28 and amended by replacing the current term ``NASDAQ
System'' with the term ``The Nasdaq Stock Market'' or ``Nasdaq''.
Proposed Section 28 would define The Nasdaq Stock Market as an
electronic securities market comprised of competing market makers whose
trading is supported by a communications network linking them to
quotation dissemination, trade reporting, and order execution systems.
Proposed Section 28 would state that The Nasdaq Stock Market also
provides specialized automation services for screen based negotiations
of transactions, on-line comparison of transactions, and a range of
informational services tailored to the needs of the securities
industry, investors and issuers.
Proposed Section 28 would also clarify that The Nasdaq Stock Market
is comprised of two distinct market tiers of the current NASDAQ System.
The first tier of The Nasdaq Stock Market would be ``The Nasdaq
SmallCap Market'' or ``SCM''. The second tier of The Nasdaq Stock
Market would be the ``Nasdaq National Market'' or ``NNM''.
On June 30, 1993, the NASD's corporate subsidiaries that operated
and serviced the NASDAQ System, i.e. Nasdaq Inc. and NASD Market
Services, Inc., were merged into a single corporation renamed ``The
Nasdaq Stock Market, Inc.''.\2\ To reflect this corporate
restructuring, proposed Section 28 would clarify that The Nasdaq Stock
Market is operated by The Nasdaq Stock Market, Inc., a wholly-owned
subsidiary of the Association.
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\2\See, Item 16, Exhibit E to The Nasdaq Stock Market, Inc.--
Annual Amendment to Registration as a Securities Information
Processor (``SIP'') attached to the NASD's March 31, 1994 letter
from Robert E. Aber, Vice President and General Counsel, The Nasdaq
Stock Market, Inc. to Jonathan G. Katz, Secretary, SEC.
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The proposed rule change would insert the proposed new terms, where
applicable, throughout Schedule D and other parts of the NASD's rules
and regulations, including the Schedules to the By-Laws; Rules of Fair
Practice; SOES Rules; ACT Rules; FIPS Rules; Nasdaq International
Services; Code of Procedure and Uniform Practice Code.
The proposed rule change would apply to all rule filings of the
Association or its subsidiary, The Nasdaq Stock Market, Inc., that are
approved prior to or are pending on the date of the Commission's
approval of the proposed rule change. Moreover, the numbering of the
definition sections are proposed to be amended to reflect any amendment
to the definition sections under Part I of Schedule D adopted prior to
the approval of the proposed rule changes.
The NASD believes that the proposed rule change is consistent with
the provisions of Section 15A(b)(6) of the Act in that the proposed
rule change is designed to perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest in that the proposed rule change
would amend certain current terms and adopt new terms relating to the
NASDAQ System in order to more appropriately describe the current
technological facilities and services provided by this national
securities market. The NASD believes that the proposed new terms will
indicate more clearly the current functionality of the NASDAQ System as
a market for securities with quotation dissemination, trade reporting,
and order execution capability, as well as other specialized automation
services for screen-based negotiations of transactions, on-line
comparison of transactions, and a range of informational services
tailored to the needs of the securities industry, investors and
issuers. The proposed new terms would also clarify that The Nasdaq
Stock Market is composed of two distinct market tiers, each with
different inclusion criteria in different parts of the rules. Finally,
the proposed rule change would make clear that The Nasdaq Stock Market
is operated by The Nasdaq Stock Market, Inc., a wholly-owned subsidiary
of the Association.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The NASD does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
(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
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 self-regulatory organization 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 NW., 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-94-48 and
should be submitted by October 26, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\3\
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\3\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-24613 Filed 10-4-94; 8:45 am]
BILLING CODE 8010-01-M