[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Notices]
[Pages 49029-49031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23475]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36226; File No. S7-24-89]
Joint Industry Plan; Solicitation of Comments and Order Approving
Amendment No. 4 to Reporting Plan for Nasdaq/National Market Securities
Traded on an Exchange on an Unlisted or Listed Basis, Submitted by the
National Association of Securities Dealers, Inc., and the Boston,
Chicago and Philadelphia Stock Exchanges
September 13, 1995.
On September 12, 1995, the National Association of Securities
Dealers, Inc., and the Boston, Chicago, and Philadelphia Stock
Exchanges (collectively, ``Participants'')\1\ submitted
[[Page 49030]]
to the Commission proposed Amendment No. 4 to a joint transaction
reporting plan (``Plan'') for Nasdaq/National Market securities traded
on an exchange on an unlisted or listed basis.\2\ The Commission is
approving the proposed amendment to the Plan and trading pursuant to
the Plan on a temporary basis to expire on October 12, 1995.
\1\The signatories to the Plan, i.e., the National Association
of Securities Dealers, Inc. (``NASD''), and the Chicago Stock
Exchange, Inc. (``Chx'') (previously, the Midwest Stock Exchange,
Inc.) Philadelphia Stock Exchange, Inc. (``Phlx''), and the Boston
Stock Exchange, Inc. (``BSE''), are the ``Participants.'' The BSE,
however, joined the Plan as a ``Limited Participant,'' and reports
quotation information and transaction reports only in Nasdaq/
National Market (previously referred to as ``Nasdaq/NMS'')
securities listed on the BSE. Originally, the American Stock
Exchange, Inc., was a Participant to the Plan, but did not trade
securities pursuant to the Plan, and withdrew from participation in
the Plan in August 1994.
\2\The Commission notes that Section 12(f) of the Act describes
the circumstances under which an exchange may trade a security that
is not listed on the exchange, i.e., by extending unlisted trading
privileges (``UTP'') to the security. Section 12(f) was amended on
October 22, 1994, 15 U.S.C. 78l (1991) (as amended 1994). Prior to
the amendment, Section 12(f) required exchanges to apply to the
Commission before extending UTP to any security. In order to approve
an exchange UTP application for a registered security not listed on
any exchange (``OTC/UTP''), Section 12(f) required the Commission to
determine that various criteria had been met concerning fair and
orderly markets, the protection of investors, and certain national
market initiatives. These requirements operated in conjunction with
the Plan currently under review. The recent amendment to Section
12(f), among other matters, removes the application requirement and
permits OTC/UTP only pursuant to a Commission order or rule. The
order or rule is to be issued or promulgated under essentially the
same standards that previously applied to Commission review of UTP
applications. The present order fulfills these Section 12(f)
requirements.
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I. Background
The Commission originally approved the Plan on June 26, 1990.\3\
The Plan governs the collection, consolidation and dissemination of
quotation and transaction information for Nasdaq/National Market
securities listed on an exchange or traded on an exchange pursuant UTP.
The Commission originally approved trading pursuant to the Plan on a
one-year pilot basis, with the pilot period to commence when
transaction reporting pursuant to the Plan commenced. Consequently, the
pilot period commenced on July 12, 1993. As requested by the
Participants in Amendment Nos. 1, 2, and 3, to the Plan, the Commission
has extended the effectiveness of the Plan three times. Accordingly,
the effectiveness of the Plan was scheduled to expire on September 12,
1995.\4\
\3\See Securities Exchange Act Release No. 28146 (June 26,
1990), 55 FR 27917 (``1990 Approval Order''). For a detailed
discussion of the history of UTP in OTC securities, and the events
that led to the present plan and pilot program, see 1994 Extension
Order, infra note 4.
\4\See Securities Exchange Act Release No. 34371 (July 13,
1994), 59 FR 37103 (``1994 Extension Order''). See also Securities
Exchange Act Release No. 35221, (January 11, 1995), 60 FR 3886
(``January 1995 Extension Order''), and Securities Exchange Act
Release No. 36102 (August 14, 1995), 60 FR 43626 (``August 1995
Extension Order'').
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As originally approved by the Commission, the Plan required the
Participants to complete their negotiations regarding revenue sharing
during the one-year pilot period. The January 1995 Extension Order
approved the effectiveness of the Plan through August 12, 1995, and
since that time the Commission has expected the Participants to
conclude their financial negotiations promptly (at the time, before
January 31, 1995), and to submit a filing to the Commission that
reflected the results of the negotiations.\5\ To date, the Participants
have not completed their financial negotiations.
\5\See January 1995 Extension Order, id, at n. 6.
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Proposed Amendment No. 4 to the Plan would extend the effectiveness
and the negotiation period for an additional month through October 12,
1995. The Commission believes it is appropriate to extend the
effectiveness of the pilot program for an additional month in order to
continue the pilot program in place while the Commission awaits the
Participants' filing of a proposed Plan amendment concerning revenue
sharing pursuant to the Plan.\6\
\6\The NASD, in its letter attached to the present filing,
states that all Plan Participants have made a good faith effort to
reach final agreement on the revenue sharing plan in accordance with
the Commission's direction in the most recent order extending the
effectiveness of the Plan. See letter from Robert E. Aber, NASD, to
Jonathan Katz, Commission, dated September 11, 1995. Presumably,
this is in reference to the Commission's August 1995 statement that:
``The Commission also is directing the Participants to submit the
filing [concerning revenue sharing] to the Commission on or before
August 31, 1995.'' August 1995 Extension Order supra note 4. The
Participants are reminded that they currently are in violation of
the Commission order because no proposal concerning finances has
been filed with the Commission. The Commission urges the
Participants to comply with the Commission's request for the filing
promptly.
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II. Extension of Certain Exemptive Relief
In conjunction with the Plan, on a temporary basis scheduled to
expire on September 12, 1995, the Commission granted an exemption from
Rule 11Ac1-2 under the Act regarding the calculated best bid and offer
(``BBO''), and granted the BSE an exemption from the provision of Rule
11Aa3-1 under the Act that requires transaction reporting plans to
include market identifiers for transaction reports and last sale data.
At the request of the Participants, this order extends these exemptions
through October 12, 1995, provided that the Plan continues in effect
through that date pursuant to a commission order.\7\ The Commission
continues to believe that exemptive relief from these provisions is
appropriate through October 12, 1995.
\7\In the August 1995 Extension Order, the Commission extended
these exemptions from August 12, 1995, through September 12, 1995.
Pursuant to a request made by the NASD, this order further extends
the effectiveness of the relevant exemptions from September 12,
1995, through October 12, 1995. See letter dated September 11, 1995,
id.
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III. Comments on the Operation of the Plan
In the January 1995 Extension Order and the August 1995 Extension
Order, the Commission solicited, among other things, comment on: (1)
Whether the BBO calculation for the relevant securities should be based
on price and time only (as currently is the case) or if the calculation
should include size of the quoted bid or offer; and (2) whether there
is a need for an intermarket linkage for order routing and execution
and an accompanying trade-through rule. The commission continues to
solicit comment on these matters.
IV. Solicitation of Comment
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, 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
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 at the
Commission's Public Reference Room. All submission should refer to File
No. S7-24-89 and should be submitted by October 12, 1995.
V. Conclusion
The Commission finds that proposed Amendment No. 4 to the Plan to
extend the operation of the Plan and the financial negotiation period
for an additional month is appropriate and in furtherance of Section
11A of the Act. The Commission finds further that extensions of the
exemptive relief requested through October 12, 1995, as
[[Page 49031]]
described above, also is consistent with the Act and the Rules
thereunder. Specifically, the Commission believes that these extensions
should serve to provide the Participants with more time to conclude
their financial negotiations and with more information to evaluate the
effects of and proposed course of action for the pilot program. This,
in turn, should further the objects of the Act in general, and
specifically those set forth in Sections 12(f) and 11A of the Act and
in Rules 11Aa3-1 and 11Aa3-2 thereunder.
It is therefore ordered, pursuant to Sections 12(f) and 11A of the
act and (c)(2) of Rule 11Aa3-2 thereunder, that Amendment No. 4 to the
Joint Transaction Reporting Plan for Nasdaq/National Market securities
traded on an exchange on an exchange on an unlisted or listed basis is
hereby approved, and trading pursuant to the Plan is hereby approved on
a temporary basis through October 12, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(29).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-23475 Filed 9-21-95; 8:45 am]
BILLING CODE 8010-01-M