[Federal Register Volume 60, Number 166 (Monday, August 28, 1995)]
[Notices]
[Pages 44532-44533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21274]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36129; File No. SR-NASD-95-27]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Approving Proposed Rule Change Relating to the
Adjustment of Open Orders
August 22, 1995.
I. Introduction
On February 3, 1995, the National Association of Securities
Dealers, Inc. (``NASD'' or ``Association'') filed with the Securities
and Exchange Commission (``SEC'' or ``Commission'') a proposed rule
change pursuant to Section 19(b)(1) of the Securities
[[Page 44533]]
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The
NASD seeks to amend Article III, Section 46 of the Rules of Fair
Practice to provide that where the issuer of a security declares a cash
dividend or other distribution of less than one cent ($.01), members
will not be required to adjust open orders for such securities.
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1994).
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Notice of the proposed rule change appeared in the Federal Register
on June 28, 1995.\3\ No comments were received in response to the
Commission release. This order approves the proposed rule change.
\3\ Securities Exchange Act Release No. 35875 (June 21, 1995),
60 FR 33442 (June 28, 1995).
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II. Description of the Proposed Rule Change
Article III, Section 46 of the Rules of Fair Practice requires
members holding open orders to proportionally reprice such orders
according to the value of the dividend or distribution on the date the
security is quoted ex-dividend, ex-rights, ex-distribution or ex-
interest. According to the NASD, shortly after the rule became
effective in September 1994, several member firms questioned the
necessity of complying with Section 46 if a dividend or other
distribution was less than one cent ($.01).
The NASD has determined that where a dividend or other distribution
of less than one cent ($.01) has been declared, the costs associated
with complying with Section 46 exceed the benefits. Specifically, the
NASD concluded that the effect of such a small dividend or other
distribution on the price of the security is de minimis and, therefore,
the likelihood that unadjusted orders will result in poor executions
for customers is remote. Accordingly, the NASD proposes to amend
Section 46 to state that where a dividend or other distribution is less
than one cent ($.01), the price of the order shall not be adjusted.
III. Discussion
The Commission believes that the NASD's proposal is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to the NASD and, therefore, has determined to approve the
rule change. Specifically, the Commission believes that the proposed
rule change is consistent with the requirements of Section 15A(b)(6)
\4\ of the Act in that it eliminates the costs and inefficiencies
associated with mandating the repricing of orders where the dividend or
distribution is less than one cent ($.01).
\4\ 15 U.S.C. 78o-3(b)(6).
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IV. Conclusion
For the reasons stated above, the Commission finds that the
proposed rule change is consistent with the requirements of the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change SR-NASD-95-27 be, and hereby is,
approved.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Security.
[FR Doc. 95-21274 Filed 8-25-95; 8:45 am]
BILLING CODE 8010-01-M