[Federal Register Volume 61, Number 49 (Tuesday, March 12, 1996)]
[Notices]
[Pages 10048-10050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5846]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36932; File No. SR-NASD-96-7]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by National Association of
Securities Dealers, Inc. Relating To Small Order Execution System Tier
Size Classifications
March 6, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ Notice is hereby given that on March 1, 1996, the National
Association
[[Page 10049]]
of Securities Dealers, Inc. (``NASD'' or ``Association'') 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 the NASD. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
\1\ 15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NASD is submitting this filing to effectuate The Nasdaq Stock
Market, Inc.'s (``Nasdaq'') periodic reclassification of Nasdaq
National Market (``NNM'') securities into appropriate tier sizes for
purposes of determining the maximum size order for a particular
security eligible for execution through Nasdaq's Small Order Execution
System (``SOES'') and the minimum quote size requirements for Nasdaq
market makers in NNM securities. Specifically, under the proposal,
1,024 NNM securities will be reclassified into a different SOES tier
size effective April 1, 1996. Since the NASD's proposal is an
interpreation of existing NASD rules, there are no language changes.
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 places 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 purpose of the rule change is to effectuate Nasdaq's periodic
reclassification of NNM securities into appropriate tier sizes for
purposes of determining the maximum size order for a particular
security eligible for execution through SOES and the minimum quote size
requirements for Nasdaq market makers in NNM securities. Nasdaq
periodically reviews the SOES tier size applicable to each NNM security
to determine if the trading characteristics of the issue have changed
do as to warrant a tier size adjustment. Such a review was conducted
using data as of December 31, 1995, pursuant to the following
established critiia:\2\
\2\ The classification criteria is set forth in footnote 1 to
Section(a)(7) of the SOES Rules and Section 2(a) of Part V of
Schedule D to the NASD By-Laws.
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NNM securities with an average daily non-block volume of
3,000 shares or more a day, a bid price less than or equal to $100, and
three or more market makers are subject to a minimum quotation size
requirement of 1,000 shares and a maximum SOES order size of 1,000
shares;
NNM securities with an average daily non-block volume of
1,000 shares or more a day, a bid price less than or equal to $150, and
two or more market makers are subject to a minimum quotation size
requirement of 500 shares and a maximum SOES order size of 500 shares;
and
NNM securities with an average daily non-block volume of
less than 1,000 shares a day, a bid price less than or equal to $250,
and less than two market makers are subject to a minimum quotation size
requirement of 200 shares and a maximum SOES order size of 200 shares.
Pursuant to the application of this classification criteria, 1,024
NNM securities will be reclassified effective April 1, 1996. These
1,024 NNM securities are set out in the NASD's Notice To Members 96-17
(March 1996).
In ranking NNM securities pursuant to the established
classification criteria, Nasdaq followed the changes dictated by the
criteria with two exceptions. First, an issue was not moved more than
one tier size level. For example, if an issue was previously
categorized in the 1,000-share tier size, it would not be permitted to
move to the 200-share tier even if the reclassification criteria showed
that such a move was warranted. In adopting this policy, Nasdaq was
attempting to maintain adequate public investor access to the market
for issues in which the tier size level decreased and help ensure the
ongoing participation of market makers in SOES for issues in which the
tier size level increased. Second, for securities priced below $1 where
the reranking called for a reduction in tier size, the tier size was
not reduced.
The NASD believes that the proposed rule change is consistent with
Section 15A(b)(6) of the Act. Section 15A(b)(6) requires, among other
things, that the rules of the NASD governing the operation of The
Nasdaq Stock Market be designed to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market. The NASD believes that the reassignment of NNM
securities within SOES tier size levels and minimum quotation size
levels will further these ends by providing an efficient mechanism for
small, retail investors to execute their orders on Nasdaq and providing
investors with the assurance that they can effect trades up to a
certain size at the quotations displayed on Nasdaq.
B. Self-Regulatory Organization's Statement on Burden on Competition
The NASD believes that the proposd 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
The proposed rule change has become effective immediately pursuant
to Section 19(b)(3)(A)(i) of the Act and subparagraph (e) of Securities
Exchange Act Rule 19b-4 because the reranking of NNM securities into
appropriate SOES tier sizes was done pursuant to the NASD's stated
policy and practice with respect to the administrative and enforcement
of two existing NASD rules. Further, in the SOES Tier Size Order, the
Commission requested that the NASD provide this information as an
interpretation of an existing NASD rule under Section 19(b)(3)(A) of
the Act. At any time within 60 days of the filing of such rule change,
the Commission may summarily abrogate such rule change if it appears to
the Commission that such action is necessary or appropriate in the
public interest, for the protection of investors, or otherwise in
furtherance of the purposes of the Act.
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
[[Page 10050]]
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 withhel 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 the file number in the caption above and
should be submitted by April 3, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\3\
\3\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-5846 Filed 3-11-96; 8:45 am]
BILLING CODE 8010-01-M