[Federal Register Volume 62, Number 172 (Friday, September 5, 1997)]
[Notices]
[Pages 47096-47105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23602]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38990; File No. SR-NASD-97-56]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by National Association of Securities Dealers, Inc. Relating to
the Creation of New Rules 6900 Through 6970 or an Audit Trail System
Owned and Operated by the National Association of Securities Dealers,
Inc.
August 28, 1997.
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 August
25, 1997,\1\ the National Association of Securities Dealers, Inc.
(``NASD'') 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 NASD Regulation,
Inc. (``NASDR''). The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ The proposal was originally filed on July 29, 1997, but was
subsequently amended on August 25, 1997.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD Regulation is proposing new Rules 6900 through 6970 of the
Conduct Rules of the NASD, relating to an audit trail system owned and
operated by the NASD that is designed to capture order information
reported by members for integration with The Nasdaq Stock Market, Inc.
(``Nasdaq'') quote information and trade information reported to the
Automated Confirmation Transaction Service (``ACT'') in order to
provide the Association with an accurate time sequenced record of
orders and transactions. Below is the text of the proposed rule change.
Proposed new language is underlined.
3110. Books and Records
* * * * *
(c) Each member that acts as a market maker in an equity security
quoted in the Nasdaq system shall record, with respect to each order
for such security that is received and executed at its trading
department, an identification of each registered person who executes
the order.
* * * * *
6900. Order Audit System
6910. Definitions
For purposes of the Rules 6900 through 6970:
(a) Terms shall have the same meaning as those defined in the By-
Laws and other rules of the Association, unless otherwise specified.
(b) ``Association'' shall mean the National Association of
Securities Dealers, Inc. and its two subsidiaries, NASD Regulation,
Inc. and The Nasdaq Stock Market, Inc.
(c) ``Customer'' shall mean a person other than a broker or dealer.
(d) ``ACT'' shall mean the Automated Confirmation Transaction
Service operated by Nasdaq, Inc.
(e) ``Index Arbitrage Trade'' shall mean an arbitrage trading
strategy involving the purchase or sale of a ``basket'' or group of
securities in conjunction with the purchase or sale, or intended
purchase or sale, of one or more cash-settled options or futures
contracts on index stock groups, or options on any such futures
contracts in an attempt to profit by the price difference, as further
defined in New York Stock Exchange Rule 80A.
(f) ``Order'' shall mean any oral, written, or electronic
instruction to effect a transaction in a Nasdaq equity security that is
received by a member from another person for handling or execution, or
that is originated by a department of a member for execution by the
same or another member, other than any such instruction to effect a
proprietary transaction originated by a trading desk in the ordinary
course of a member's market making activities.
(g) ``Order Audit System'' shall mean the automated system owned
and operated by the Association that is designed to capture Order
information reported by members for integration with trade information
reported to ACT and quotation information disseminated by members in
order to provide the Association with an accurate time sequenced record
of orders and transactions.
(h) ``Program Trade'' shall mean a trading strategy involving the
related purchase or sale of a group of 15 or
[[Page 47097]]
more securities having a total market value of $1 million or more, as
further defined in New York Stock Exchange Rule 80A.
(i) ``Reporting Agent'' shall mean a member that enters into any
agreement with another member pursuant to which the Reporting Agent
agrees to fulfill such member's obligations under Rule 6950.
(j) ``Reporting Member'' shall mean a member that receives or
originates an Order.
6920. Applicability
(a) Unless otherwise indicated, the requirements of Rules 6910
through 6970 are in addition to the requirements contained in the By-
Laws and other rules of the Association.
(b) Unless otherwise indicated, the requirements of Rules 6910
through 6970 shall apply to all brokers and dealers admitted to
membership in the Association and to their associated persons.
(c) Unless otherwise indicated, the requirements of Rules 6910
through 6970 shall apply to all executed or unexecuted Orders for
equity securities traded in The Nasdaq Stock Market.
6930. Synchronization of Member Business Clocks
Each member shall synchronize its business clocks that are used for
purposes of recording the date and time of any event that must be
recorded pursuant to the By-Laws or other rules of the Association,
with reference to a time source as designated by the Association, and
shall maintain the synchronization of such business clocks in
conformity with such procedures as are prescribed by the Association.
6940. Recording of Order Information
(a) Procedures:
(1) Subject to the terms and conditions contained in Rules 6910
through 6970, each Reporting Member shall:
(A) immediately following receipt or origination of an Order,
record each item of information described in paragraph (b) of this Rule
that applies to such Order, and record any additional information
described in paragraph (b) immediately after such information is
received or becomes available; and
(b) immediately following the transmission of an Order to another
member, or from one department to another within the same member,
record each item of information described in paragraph (b) of this Rule
that applies with respect to such transmission.
(2) Each required record of the time of an event shall be expressed
in terms of hours, minutes and seconds.
(3) Each Reporting Member shall, by the end of each business day,
record each item of information required to be recorded under this Rule
in such electronic form as is prescribed by the Association from time
to time.
(b) Order information required to be recorded under this Rule
includes:
1. an order identifier assigned to the Order by the Reporting
Member that uniquely identifies the Order for the date it was received;
2. the identification symbol assigned by the Association to the
security to which the Order applies;
3. the member identification symbol assigned by the Association to
the Reporting Member;
4. the identification of any department and any registered person
who receives the Order directly from a customer;
5. where the Order is originated by a Reporting Member, the
identification of the department of the member that originates the
Order;
6. where the Reporting Member is a party to an agreement described
in Rule 6950(c), the identification of the Reporting Agent;
7. the number of shares to which the Order applies;
8. the designation of the Order as a buy or sell order;
9. the designation of the Order as a short sale order;
10. the designation of the Order as a market order, limit order,
stop order or stop limit order;
11. any limit or stop price prescribed in the Order;
12. the date on which the Order expires;
13. the time limit during which the Order is in force;
14. any request by a customer that an order not be displayed, or
that a block size order be displayed, pursuant to Rule 11Ac1-4(c) under
the Securities Exchange Act of 1934;
15. any minimum quantity of shares required for execution;
16. special handling requests, specified by the Association for
purposes of this Rule;
17. the date and time the Order is originated or received by a
Reporting Member;
18. an identification of the Order as related to a Program Trade or
an Index Arbitrage Trade;
19. the type of account, i.e., retail, wholesale, employee, or
proprietary, for which the Order is submitted;
20. where a Reporting Member transmits an Order to another
department within the member: (A) the order identifier assigned to the
Order by the Reporting Member, (B) the member identification symbol
assigned by the Association to the Reporting Member, (C) the date the
Order was first originated or received by the Reporting Member, (D) an
identification of the department to which the Order was transmitted,
and (E) the date and time the Order was received by that department;
21. when a Reporting Member transmits an Order to another member:
(A) the order identifier assigned to the Order by the Reporting Member,
(B) the member identification symbol assigned by the Association to the
Reporting Member, (C) the member identification symbol assigned by the
Association to the member to which the Order is transmitted, (D) the
date the Order was first originated or received by the Reporting
Member, (E) the date and time the Order is transmitted, and (F) the
number of shares to which the transmission applies.
22. when a Reporting Member receives an Order from another member,
in addition to all other applicable information items that apply with
respect to such Order: (A) the order identifier assigned to the Order
by the member that transmits the Order, (B) the member identification
symbol assigned by the Association to the member that transmits the
Order, and (C) the date the Order was first originated or received by
the member that transmits the Order;
23. when a Reporting Member modifies or receives a modification to
the terms of the Order, in addition to all other applicable information
items (including a new order identifier) that would apply as if the
modified Order were originated or received at the time of the
modification: (A) the order identifier assigned to the Order by the
Reporting Member prior to the modification, (B) the date and time the
modifications was originated or received, and (C) the date the Order
was first originated or received by the Reporting Member.
24. when the Reporting Member cancels or receives a cancellation of
an Order, in whole or in part: (A) the order identifier assigned to the
Order by the Reporting Member, (B) the member identification symbol
assigned by the Association to the Reporting Member, (C) the date the
Order was first originated or received by the Reporting Member, (D) the
date and time the cancellation was originated or received, (E) if the
open balance of an Order is canceled after a partial execution, the
number of shares canceled, and (F) whether the Order was canceled on
the
[[Page 47098]]
instruction of a customer or the Reporting Member; and
25. when an Order is executed, in whole or in part: (A) the order
identifier assigned to the Order by the Reporting Member, (B) the
member identification symbol assigned by the Association to the
Reporting Member, (C) the date the Order was first originated or
received by the Reporting Member, (D) the Reporting Member's number
assigned for purposes of identifying transaction data in ACT, (E) the
designation of the Order as fully or partially executed, (F) the number
of shares to which a partial execution applies and the number of
unexecuted shares remaining, (G) an identification of each registered
person who executed the Order, and (H) the date and time of execution.
6950. Order Data Transmission Requirements
(a) General Requirement
All applicable order information required to be recorded under Rule
6940 shall be transmitted to the Order Audit System by each Reporting
Member or by a Reporting Agent pursuant to an agreement described by
paragraph (c) of this Rule.
(b) Method of Transmitting Data
(1) Order information shall be transmitted in electronic form, as
may be prescribed by the Association from time to time, to a receiving
location designated by the Association.
(2) Each Reporting Member shall transmit to the Order Audit System
a report containing each applicable item of Order information
identified in Rule 6940(b) whenever an Order is originated, received,
executed, canceled, modified, or transmitted to another member or
another department within the member. Each report shall be transmitted
on the day such event occurred, or with respect to any such information
that is not available on such day, on the day that such information
fist becomes available. Order information reports may be aggregated
into one or more transmissions, during such business hours as may be
prescribed by the Association.
(c) Reporting Agent Agreements
(1) Any Reporting Member may enter into an agreement with a
Reporting Agent pursuant to which the Reporting Agent agrees to fulfill
the obligations of such Reporting Member under this Rule. Any such
agreement shall be evidenced in writing, which shall specify the
respective functions and responsibilities of each party to the
agreement that are required to effect full compliance with the
requirements of this Rule.
(2) All written documents evidencing an agreement described in
paragraph (1) shall be maintained by each party to the agreement.
(3) Each Reporting Member remains primarily responsible for
compliance with the requirements of this rule, notwithstanding the
existence of an agreement described in this paragraph.
6960. Violation of Order Audit System Rules
Failure of a member or person associated with a member to comply
with any of the rules or requirements of Rule 6910 through Rule 6970
may be considered conduct that is inconsistent with high standards of
commercial honor and just and equitable principles of trade, in
violation of Rule 2110.
6970. Effective Date
The requirements of the Order Audit System shall be effective in
accordance with the following schedule:
(a) The requirements of Rule 6930 shall be effective on February 2,
1998.
(b) The requirements of the Order Audit System shall be effective
on August 8, 1998 with respect to Orders that are captured by members
in electronic form upon or promptly after receipt (``electronic
order'').
(c) The requirements of the Order Audit System shall be effective
on January 1, 1999 for Orders other than electronic Orders that: (i)
are received at the trading department of market makers in the
securities that are the subject of the Orders, and (ii) are executed on
the same day on which they are received, provided that only information
items (1), (2), (3), (6) through (17), (19), (22), (23), (24), and (25)
(other than 25(G)), specified in Rule 6940(b) shall be required to be
recorded and reported with respect to such Orders.
(d) The requirements of the Order Audit System shall be effective
on January 31, 2000 in all respects with respect to all Orders.
(e) The requirements of Rule 3110(c) shall be effective from
January 1, 1999 to January 31, 2000.
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. NASD Regulation 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
a. Summary
The NASDR is proposing a series of rule changes (``Proposed Rule'')
to create a new order audit trail system (``Order Audit System'') that
would impose obligations on member firms to retain in electronic form
and to report to NASDR certain items of information with respect to
orders received by members relating to equity securities traded in
Nasdaq. This information would be integrated with transaction data
currently reported by members through ACT and quotation information
disseminated by members. In addition, related to the operation of the
Order Audit System, the Proposed Rules would require that member firms
maintain synchronization of their member clocks with a specific time
source designated by the Association.
The Order Audit System will be operated by NASDR as the operating
subsidiary of the Association that is responsible for regulating member
firms and conducting surveillance of the Nasdaq Market. NASDR will
obtain ACT transaction data from, which is responsible for receiving
ACT transaction information, on a daily basis for purposes of
constructing an integrated audit trail of transaction and order data,
and members will be required to transmit ACT identifying information to
the Order Audit System. The combination of order data received by the
Order Audit System and ACT data is discussed further below.
The Order Audit System would provide a substantially enhanced body
of information regarding orders and transactions that would improve the
NASDR's ability to conduct surveillance investigations of member firms
for violations of Association rules. In addition, the implementation of
the Order Audit System would directly fulfill one of the undertakings
contained in the order issued by the SEC relating to the effectuation
of the Association's regulatory responsibilities.\2\ Pursuant to the
SEC Order, the Association agreed to undertake to design and implement
by August 8, 1998 (or as specified by further order of the Commission)
an
[[Page 47099]]
audit trail sufficient to enable the Association to reconstruct markets
promptly, conduct efficient surveillance and enforce its rules. The
audit trail is required, subject to the Commission's approval, at a
minimum, to (a) provide an accurate time-sequenced record of orders and
transactions, beginning with the receipt of an order at the first point
of contact between the broker-dealer and the customer or counterparty
and further documenting the life of the order through the process of
execution, and (b) provide for market-wide synchronization of clocks
utilized in connection with the audit trail.
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\2\ See, In the Matter of National Association of Securities
Dealers, Inc., SEC Release No. 34-37538 (August 8, 1996);
Administrative Proceeding File No. 3-9056 (``SEC Order'').
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In general, the Proposed Rules would require that each member
receiving an order relating to equity securities traded in the Market
must electronically capture specified information related to the order
and electronically transmit this information to the Order Audit System.
These requirements would apply both to orders originated by customers
and to proprietary orders originated by a department of a member firm
and sent to its trading desk or to another member for execution.
Further, for both a customer order and an order originated by a
department, or desk, of a member firm, the requirement to capture and
transmit information would apply whenever the order is passed to
another department of the same firm.
Order information would be required to be submitted in either
single or multiple electronic file transmissions on the same day that
the order, or the specific information pertaining to the order, was
received, originated, canceled, modified, transmitted, or executed.
Where information containing a particular order is not complete or
changes, because for example, the order is only partially executed on
the day that it is received, but the order remains outstanding, or if
the order is canceled, the additional information would be required to
be transmitted on the day that the information first becomes available.
The Proposed Rules contain a special provision that allows a firm
to enter into an arrangement with another member pursuant to which such
member agrees to report order information on its behalf, in the same
way that firms now contract with other members to report transaction
data to ACT. In each case, however, the member that actually receives
or originates the order would remain primarily responsible for
fulfilling each of its obligations under the Proposed Rules.
In addition to the recording and transmission requirements, the
Proposed Rules would require that members synchronize their business
clocks used for purposes of recording order or trade data to the
Association with reference to a single time designated by the
Association for this purpose, and that they adopt such procedures as
may be necessary to maintain such synchronization during each trading
day. This provision is designed to ensure that the times of various
events that are reported pursuant to the Proposed Rules are reported in
conjunction with a single and verifiable reference point.
The implementation schedule for the Proposed Rules would require
all members to synchronize their business clocks that record times for
regulatory purposes pursuant to Rule 6930 by February 2, 1998. The
implementation schedule for the Proposed Rules contemplates that the
requirements would apply to all orders that are received
electronically, or captured in electronic form promptly after receipt,
as of August 8, 1998. In addition, the Proposed Rules would apply
January 1, 1999, a slightly later implementation date, to all orders in
an equity security that are received by other than electronic means at
the trading desk of a market maker in the security and that are
executed on the same day on which they are received. With respect to
this group of orders, however, the information required to be
electronically recorded and transmitted to the Order Audit System is
limited to items of information that are expected to be readily
available at the trading desk. These items are enumerated in Rule
6970(c). The proposed implementation schedule would be completed on
January 31, 2000, when the Proposed Rules would apply in all respects
to all Orders.
Based on extensive consultation with members and regulators and on
its own analysis, NASDR believes that, given the substantial initial
investments that will be required by member firms to comply with the
proposed requirements, and in light of other substantial systems costs
that members have been and will be required to make during the next
several years, it is appropriate to limit the initial application of
the rules. Where members already are capturing order information
electronically, the proposal will require that members alter their data
processing systems as necessary in order to permit recording all the
items required by the rules and to transmit this information to the
Order Audit System.
The proposed January 1, 1999 inclusion of orders received by market
makers at their trading desks is based on the critical role that market
makers play in the market for Nasdaq securities, and the important
regulatory interest in assuring that the processing of orders by market
makers complies with all applicable requirements. The limitation of the
elements that must be recorded recognizes, however, that some
information may not be readily available at the trading desk, and that
an orderly and efficient implementation of the Order Audit System with
respect to market maker telephone orders could be impeded by
immediately requiring the manual recordation of all the data elements.
In connection with market maker orders, one item of information, the
identity of the trader who executes a market maker order, is not being
required initially because of the additional time that would be
required to manually input long identification numbers in connection
with each transaction. However, a temporary amendment to Rule 3110 is
being proposed that would require that the member record the identity
of traders executing orders sent to market maker trading desks. This
provision would ensure that information that could be important for
regulatory purposes will be available to regulators upon request.
The limitation to orders that are received and executed on the same
day reflects the expectation that compliance burdens will be relatively
less when members are contemporaneously being required to provide
transaction reports related to the same security following the
availability of such additional information.
Rule 6970 proposes to apply the Order Audit System requirements on
January 31, 2000 in all respects to all orders. NASDR solicits comment
on this issue, based on system changes or other factors that would
apply to members that do not presently maintain systems for electronic
receipt and routing, and on any associated cost estimates.
b. Section by Section Discussion
Rule 6910--Definitions. Rule 6910 prescribes the definitions that
apply to each of the other rules pertaining to the Order Audit System.
Paragraph (a) provides that, unless otherwise defined, terms have the
same meanings assigned to them in the By-Laws and other rules of the
Association.
The term Order is defined by paragraph (f) to include any oral,
written, or electronic instruction to effect a transaction in a Nasdaq
equity security that is either originated by a member or received by a
member for handling or execution. The definition is not intended to
apply to communications that involve only ``indications of interest''
or discussions that are prefatory to the determination
[[Page 47100]]
of the sender of the order to instruct the member to execute or attempt
to execute a transaction. At the same time, because the definition
includes orders that are received for ``handling,'' it would include
instructions that may not be capable of being executed immediately or
fully executed at one time, but may instead require negotiation with
market makers or other firms, or may require execution in a series of
separate transactions.
The definition applies to orders that are received from public
customers and from other broker-dealers. It would include orders
originated by affiliates of a member and sent to that member, including
for example, an order originated by a registered investment company
sent to its affiliated broker-dealer. In addition, it applies to orders
that are originated by one department of a member and transmitted to
another department of the member, e.g., an order that is originated by
an institutional sales desk and transmitted to a trading desk or sent
to another member. The definition would include, among others, all
orders that member firms are obligated to execute under the terms of
the ``Firm Quote Rule'' (Rule 11Ac1-1 under the Securities Exchange Act
of 1934). The term expressly would not include, however, a proprietary
transaction originated by a trading desk in the ordinary course of a
member's market making activities.
The definition of Reporting Member in paragraph (j) describes the
members who are subject to the requirements simply as members that
receive or originate Orders. The definition includes members who
receive Orders from public customers as well as from other members. In
conjunction with the definition of ``Order'', this definition makes
clear that all Orders from public customers, from other securities
firms, and those that are originated in-house are subject to the
requirements of the Proposed Rules.
Paragraph (e) defines the term Index Arbitrage Trade to refer to an
arbitrage trading strategy involving the purchase or sale of a group of
securities in conjunction with the actual or intended purchase or sale
of one or more cash-settled options, futures contracts on stock
indexes, or options on such futures contracts in an attempt to profit
by the price difference. The term Program Trade in paragraph (h) is
defined to refer to a trading strategy involving the related purchase
or sale of a group of 15 or more securities with a market value of at
least $1 million. Both definitions generally track the related
definitions in, and are further defined by reference to, New York Stock
Exchange Rule 80A. The definitions are relevant to the information
recording requirements of Rule 6940, described below, that pertain to
Orders that are part of an index arbitrage or program trade.
The term Report Agent is defined to include members that agree with
other members to fulfill the reporting obligations of Rule 6950 on the
other member's behalf and is specifically relevant to Rule 6950(c),
discussed further below, which permits the use of such agreements,
subject to certain conditions.
Rule 6930--Synchronization of member business clocks. The
reliability and usefulness of the Order Audit System will depend on the
ability of NASDR to require that the business clocks of member firms
that are required to record audit trail data are appropriately
synchronized. The requirement for such synchronization is a specified
element of the undertakings contained in the SEC Order. Because the
determination of whether members have complied with various rules and
standards to which they are subject, including among others, best
execution obligations, compliance with the obligation to honor firm
quotes, and prohibitions on frontrunning customer orders, depends
critically on establishing with reasonable confidence the time at which
Order information is received, the synchronization requirement is a
necessary and integral part of the Order Audit System. This requirement
is important both with respect to synchronization of clocks within a
member firm as well as with respect to market-wide synchronization
across member firms.
Proposed Rule 6930 provides that each member shall synchronize its
business clocks that are used for purposes of recording and reporting
Order, transaction, or related data required by the By-Laws or other
rules of the Association, with reference to a specific time source as
designated by the Association. The rule further requires that each
member firm maintain the synchronization of such clocks in conformity
with such procedures as the Association may prescribe. Accordingly, the
rule would apply the synchronization requirement to recording and
reporting of information to the Order Audit System, to ACT, or to other
requirements that the Association may adopt pertaining to transmission
of Order and transaction data.
Presently, members and electronic communication networks and
service bureaus use a variety of methods for synchronizing business
clocks. These methods range from manual synchronization based on time
derived from local time sources to subscription to commercial providers
of satellite services that programmatically update computers with
accurate time. Accordingly, the degree of accuracy of recorded times
may vary significantly among member firms.
In implementing this requirement, NASDR would designate, through
Notices to Members or other appropriate means, as appropriate sources
one or more satellite time scales that are generally recognized and
widely followed for commercial purposes. For example, the National
Institute of Standards and Technology (NIST) and U.S. Naval Observatory
maintain time scales that are essentially equivalent, i.e., they are
maintained within a very small fraction of a second of each other.\3\
The designation of reference sources such as these should provide to
both members and investors an efficient means for confirming the
accuracy and reliability of business clocks that are used for trading
and reporting purposes.\4\
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\3\ See Proceedings of the Institute of Electrical and
Electronics Engineers, Time and Frequency Information in
Telecommunications Systems Standardized by Federal Standard 1002A,
Volume 79, No. 7 (July 1991).
\4\ For example, a member or investor can obtain through the
Internet information concerning the NIST's Automated Computer Time
Service. This service provides to users the ability to synchronize
business clocks programmatically with time maintained by NIST. The
NIST Website can be accessed at http://www.bldrdoc.gov/timefreq/
service/acts.htm.
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The obligation to maintain the synchronization of business clocks
will be ongoing. It is intended that any policies and procedures
adopted by NASDR in this respect will require that the accuracy of
clocks be resynchronized on at least a daily basis. NASDR also
anticipates that compliance examinations would include a review for the
existence of adequate procedures and checks to fulfill this obligation,
as well as testing the degree of accuracy of clocks that are used for
providing audit trail information against the time reference that is
designated by NASDR.
Pursuant to the proposed rule, each such recorded time would need
to be synchronized with a designated time and recorded in hours,
minutes, and seconds. NASDR will provide further guidance, prior to the
effective date of the Proposed Rules, as to the specific standard of
accuracy that will need to be maintained, given existing technology and
the requirement that times be recorded in seconds. NASDR expects to
review carefully member firms' compliance with these requirements,
[[Page 47101]]
given the importance of accurate time recordation to the integrated
audit trail.
As discussed below, the proposed effective date of the
synchronization requirement is February 2, 1998, prior to the
effectiveness of the other Proposed Rules.
Rule 6940--Recording of Order information. Rule 6940 prescribes the
specific items of Order data that are required to be recorded by each
Reporting Member. Paragraph (a)(1)(A) specifically requires that each
Reporting Member shall, immediately following receipt of origination of
an Order, record each applicable item of information listed in
paragraph (b) of the rule. In addition, where specified information is
not available at the time that the Order is received, or if information
that has been received changes, the rule would require that such
information be immediately recorded when it is received. For example,
if the Order is canceled, this information would necessarily need to be
separately recorded when received.
Paragraph (a)(1)(B) provides that when a member transmits an Order
to another member, or from one department to another, each item of
information described in paragraph (b) that applies with respect to
such transmission must be recorded.
Under paragraph (a)(2), each required record of the time of an
event, including the time of receipt or transmission within a member or
to another member, must be expressed in terms of hours, minutes, and
seconds. The recorded times will be subject to the synchronization
requirements, described above.
Finally, pursuant to paragraph (a)(3), each item of information
that is not initially recorded electronically, or that is not recorded
electronically in an appropriate form, must be recorded in such
electronic form as is prescribed by the Association, before the end of
the business day on which the information is received. The rule would
not preclude recording Order information by paper means, provided that
the information is translated into electronic form intra-day in order
to permit the daily reporting of this information to the Order Audit
System. In many cases, efficiencies may dictate initially recording
Order information in electronic form at the point of receipt, but the
rule does not mandate this method.
As noted, the rule would require that specified information that
pertains to each Order be recorded ``immediately'' following receipt.
The rule does not attempt to specify a time limit between receipt and
recordation, since the factor may differ marginally based on the volume
or Orders that are received at any one time, and whether a particular
Order in communicated electronically or orally. Where Order information
is not received and processed electronically, it is expected that the
time required will be defined by reference to the time practically
required to react to the information received and either enter it into
an electronic database or manually record it for later translation into
electronic form. Whether an Order is received electronically or
manually, members would be required to accurately time stamp thee
Orders on receipt to comply with the requirements of the Rule. The rule
would not permit the ``bunching'' or aggregating of Orders for these
purposes but instead would require that information pertaining to each
Order be entered sequentially as it is received.
Paragraph (b) of the rule lists the various items of information
that are required to be recorded under the rule. We note that this list
does not necessarily reflect all of the information that may prove to
be necessary or useful for audit trial purposes, and that other or
additional items of information could be sought after NASDR has
acquired experience with the Order Audit System. For purposes of
understanding the different recording requirements in various
situations, the following description categories the recording
requirements in the following ways: basic identifying information
pertaining to the Order itself, or to members, departments or
individuals who handle the Order; the terms of the Order as specified
by the customer; other information related to the Order; information
that is required to be recorded whenever an Order is routed within a
member or is passed from one member or another; information that is
related to modifications or cancellations; and information pertaining
to a complete a partial execution of an Order.
Identifying information. At the point that an Order is received or
originated, certain identifying information is required to be recorded,
including a unique order identifier assigned by the member firm, the
member identification symbol assigned by the Association to the member,
and the date on which the Order was received or originated. The
combination of these three elements will uniquely identify an Order
from all other Orders received or originated by any member on any day.
In assigning order identifies, it is intended that members may use
identification numbering methods that they presently employ, consistent
with any specific requirements imposed by NASDR.
Additional identifying information includes the identification
symbol assigned by the Association to the security issue; an
identification of the department and any registered person who receives
an Order from a customer; where an Order is originated by a member
firm, an identification of the department where the Order originated;
and where a member is using a Reporting Agent to help fulfill is
reporting obligations under Rule 6950, the member identification symbol
assigned by the Association to that firm. As noted below, additional
information will be required to be recorded when a member routes or
passes an Order within the firm or to another member.
With respect to departments and individuals who receive Orders, the
rule limits coverage to persons who receive Orders directly from
customers, rather than from other members. Rule 6910 defines the term
``customer'' to exclude members or other broker-dealer firms. This
formulation results from the significant compliance burden that could
result from identification of each individual person who receives an
Order from any source, and the relatively greater importance for
surveillance purposes attached to identifying persons who receive
communications from public customers with respect to their Orders.
NASDR specifically solicits comment on the appropriateness of this
limitation.
In addition, the rule requires identification of persons who are
registered with the Association, rather than extending the coverage to
``associated persons.'' \5\ Because all persons handling orders
relating to securities are required to be registered with the
Association, we believe that this requirement should not create a
significant problem for members. In addition, because all registered
persons are assigned a number by the Association's Central Registration
Depository (``CRD''), and many members may use these numbers currently
for purposes of identifying registered persons in their data processing
systems, we believe that the limitation to registered persons will
significantly lessen the compliance burdens that would be imposed.
---------------------------------------------------------------------------
\5\ See NASD Bylaws, Article I(q); 15 U.S.C. Sec. 78c(a)(18).
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Terms of the Order. The following items of information will be
required with respect to the terms of the Order that are specified by
the party placing the Order: the number of shares to which the Order
applies; designation as
[[Page 47102]]
a buy or sell order; designation as a market order, limit order, stop
order or stop limit order; any limit or stop price prescribed in the
Order; designation as a short sale order; designation of the time limit
during which the Order is to remain in force; any special handling
requests contained in the Order; any minimum number of shares required
for execution; and the date on which the Order expires.
Prior to the effective date of the Proposed Rules, NASDR will
prescribe the types of special handling requests that would need to be
recorded. The order type designations, e.g., market or limit order, are
not intended to be exclusive, and other designations of Order types
that may be prescribed by NASDR based on current commercial practice
may also be required. Each such item of information is required to be
recorded at the time the Order is placed. As described below, where a
customer modifies an existing Order, the modification is treated as a
new Order, and the modified information is required to be recorded when
the modification is received.
Other information related to the Order. Other information directly
related to the Order itself includes: the date and time on which the
Order was received; the type of customer account for which the Order is
placed; whether the Order is related to a Program Trade or Index
Arbitrage Trade \6\; and any special instructions required by the
customer under the Commission's Order Handling Rules.
---------------------------------------------------------------------------
\6\ Transaction data for trades that are part of a program trade
or index arbitrage strategy is required by the New York Stock
Exchange to be transmitted to ACT with respect to securities listed
on that exchange.
---------------------------------------------------------------------------
As noted above, recording of the date and time on which the Order
was received is of paramount importance for reviewing compliance with a
number of regulatory requirements, because of the importance of the
timing of market developments and activities by the member in relation
to Order receipt time. The time of receipt must be accurately recorded,
with reference to the synchronized time that is required to be
maintained under Rule 6930. For purposes of defining the type of
account for which the Order was placed, the rule describes four
categories: retail, wholesale, employee, or proprietary. A separate
designation for ``institutional'' accounts has not been included
because of our understanding that firm record keeping procedures do not
make use of this classification for most purposes, and there is no
clear test that is applied for purposes of differentiating
``institutional'' from other public customer accounts. NASDR solicits
comment on whether the prescribed categories are appropriate and
useful.
The Rule would require identification of situations in which a
customer provides special instructions with respect to display of limit
orders, pursuant to Rule 11Ac1-4(c) under the Exchange Act. That rule
expressly excepts from the requirement to display limit orders: (i)
block orders, unless customers request that they be displayed; and (ii)
those situations in which customers request that limit orders not be
displayed.
Orders routed within a firm. When an Order is routed to another
department of the member for execution or for other purposes, item 20
of Rule 6940 prescribes information that is required with respect to
this event. Specifically, the information required includes the order
identifier assigned to the Order by the member, the member
identification symbol, the date the Order was first received or
originated by the member, an identification of the department to which
the Order was transmitted, and the date and time the Order was received
by that department.
Orders routed to another firm. When an Order is sent to another
firm, for execution or any other purpose, items 21 and 22 prescribe the
information that is required on the part of both the sending and
receiving members in order to accurately track the Order. With respect
to the sending firm, the following elements are required in order for
the Order Audit System to track the Order: the unique order identifier
assigned by that firm; the firm's member identification symbol; the
date on which the Order was originally received or originated by the
member; the date and time the Order is transmitted; the identification
symbol of the member to which the Order is transmitted; and the number
of shares that are routed. The requirement to record the member
identification symbol assigned by the Association to the receiving firm
will require that each Reporting Member retain a list of symbols
assigned to all members by the Association for electronic reporting
purposes.
Where an Order is transmitted to another member, the receiving firm
is required to capture all of the elements prescribed in Rule 6940(b)
that apply whenever an Order is received. For example, it is required
to assign its own unique order identifier and to record all the other
terms pertaining to the Order, regardless of whether the Order is
originated by the transmitting member or by a third party. In addition
to these requirements, other elements pertaining to the sending firm
are required. Specifically, the receiving firm will be required to
record the unique order identifier assigned by the sending firm, that
firm's member identification symbol, and the date the Order was
originally received or originated by the transmitting firm. In
aggregate, this information will be used to link the Order from firm to
firm for purposes of accurately tracking each Order that is passed.
NASDR requests comment as to the burdens involved in requiring each
receiving firm to record this identifying information with respect to
each telephoned Order between members.
Modifications and cancellations. Whenever a member modifies the
terms of an Order that it has originated, or receives a modification of
terms from a customer or from another member, the Order Audit System
will treat the modification effectively as a cancellation of the
original Order and its replacement by the modified Order. Accordingly,
in this circumstance, all of the other information items prescribed by
the rule, including a new order identifier, would need to be recorded
as if the Order was modified were originated or received at the time of
the modification. In addition, to permit the linkage by the Order Audit
System of this ``new'' Order to the previous one, item 23 requires that
the following elements be recorded: the order identifier that was
assigned prior to the modification; the date and time the modification
was originated or received; and the date the original Order was first
originated or received by the member.
In the case of a ``true'' cancellation of an existing Order,
whether it is a total or partial cancellation, the following elements
are required to be recorded: the order identifier assigned by the
Reporting Member; its member identification symbol; the date the Order
was first originated or received by the Reporting Member; the date and
time the cancellation was originated or received; if the open balance
of an Order is canceled after a partial execution, the number of shares
canceled; and whether or not the Order was canceled at the instruction
of the Reporting Member, or a customer.
Executions. One of the most critical functions of the Order Audit
System will be to link information reported to the Order Audit System
with transaction data that members are now required to report to ACT.
This linkage is central to the construction of a wholly integrated
audit trail that incorporates the new requirements with existing
information for purposes of tracking each Order from the time that it
arises until it is executed, modified, or canceled. This linkage is
accomplished
[[Page 47103]]
principally by requiring that the executing member firm record, and
report to the Order Audit System under Rule 6950, the Branch Sequence
number included in each report to ACT for a trade associated with the
Order. The member firm reporting to ACT must include, in the Branch
Sequence field of the ACT report, and Order identifier that is unique
for that firm throughout the reporting day. In addition, for purposes
of linking transaction and order data, members will be required to
record and report the unique order identifier assigned by the firm, the
firm's member identification symbol; and the date the Order was first
originated or received.
In addition to these elements, item 25 of Rule 6940(b) prescribes
the following elements: a designation of the Order as fully or
partially executed; the number of shares to which a partial execution
applies and the number of unexecuted shares remaining; an
identification of each registered person who executed the Order; and
the date and time of execution. Because the rule would prescribe
identification of each registered person who receives an Order from a
customer (see ``Identifying Information'' above), in tandem with this
requirement, the Order Audit System will be able to identify each
individual involved at the inception of the receipt of an Order from a
customer, and each individual who actually executes every Order. As
noted above, the identity of traders who execute non-electronic Orders
at market maker trading desks is not being required, but instead NASDR
is proposing an amendment to Rule 3110 to require that this identifying
information be recorded in connection with each such Order that is
executed so that the information will be available for regulatory
purposes. The requirements of the proposed amendment to Rule 3110 will
be effective only from January 1, 1999 until January 31, 2000, at which
time the identity of all registered persons who execute an Order will
be required to be recorded with the other information items listed
under Rule 6940(b)(25).
Rule 6950--Order data transmission requirements. Rule 6950
prescribes the requirements that apply to transmitting to the Order
Audit System information that is recorded under rule 6940. Paragraph
(a) states the general requirement that all applicable information that
is required to be recorded with regard to a particular Order must be
transmitted to the Order Audit System by the Reporting Member, or by a
Reporting Agent that agrees to send reports on behalf of the Recording
Member.
Paragraph (b) sets forth the means by which a data is required to
be transmitted. Subparagraph (1) provides that all Order information
shall be transmitted in electronic form, as may be prescribed by the
Association from time to time, to a receiving location designated by
the Association. Compliance with the reporting requirements of the
Proposed Rules generally will require member firms to modify existing
systems to permit efficient and timely transmission of information,or
in some cases, to create new data capturing and reporting systems.
Based on the final requirements contained in the Proposed Rules
following their approval by the Commission, NASDR will consult with and
provide notices to members as necessary in order to further clarify the
changes that will be required and to assist member firms in making
these modifications in the most cost-efficient way possible. In
circumstances where the cost of such changes appears to be
disproportionate based on the size of the firm or the nature of its
trading activity, paragraph (c) as discussed below would permit the
reporting responsibility to be assumed by another member that maintains
the technological capability to perform this function. NASDR
specifically solicits comment from member firms on this issue, to the
extent that they have information that would permit an estimate of the
costs that would be required based on the configuration of the Order
Audit system defined by the Proposed Rules.
Subparagraph (b)(2) prescribes other requirements for transmitting
reports. Each Reporting Member would be required to transmit, on the
day that the Order is received, originated, canceled, modified,
transmitted, or executed, each applicable item of Order data required
to be recorded in electronic form under Rule 6940 that is available on
that day, including information pertaining to modifications,
cancellations or executions that occur on that day. Where information
that initially is recorded changes later in the same day because, for
example, a customer determines to modify the terms of the Order due to
changing market conditions, consistent with the requirements noted
above (see ``Modifications and Cancellations''), the member would
report the modified Order as if it were a new Order, along with the
other information required to be recorded when Orders are modified.
With respect to Orders that are not fully executed on that day that
they are received, any additional information pertaining to the Order,
including execution information, would be transmitted on the day that
it first becomes available. The rule provides that Order reports will
be transmitted in either single or multiple files during such business
hours as may be prescribed by the Association. This provision is
intended to provide members with the flexibility to provide reports in
the most time and cost-efficient way. Particularly during periods of
heavy volume, it may be desirable to transmit groups of report at
various intervals during the course of the day. In addition, this
flexibility is intended to avoid delays or other problems in processing
information by the Order Audit System that could be caused by the
transmission of reports by member firms at or near the same point in
time.
Based on further development of the Order Audit System and
determinations relating to system capacity and other factors, NASDR
will prescribe the hours during which information may be transmitted.
The prescribed hours likely will extend past the end of the trading
day. The proposal contemplates that all Order information, along with
corresponding ACT data that has been integrated with such information,
will be available to NASDR staff at the beginning of the trading day
following the day on which the information has been transmitted.
Paragraph (c) provides the conditions to use agreements between
members and Reporting Agents, by which these agents agree to fulfill
reporting obligations under the Rule. Each agreement is required to be
set forth in writing, specifying the respective functions and
responsibilities of each party. Further, each agreement is required to
be maintained by each party. Subparagraph (c)(3) provides that the
Reporting Member in each case remains primarily responsible for
compliance with the reporting obligations. It is expected therefore
that each member that is a party to such an agreement will exercise
appropriate diligence to insure that the Reporting Agent is discharging
the member's obligations.
NASDR believes that the ability to rely on reporting relations is
important to the practicability of the Order Audit System from the
standpoint of many small and medium-size firms. Presently, clearing
relationships often include the responsibility to report trade
information to ACT on behalf of member firms. It is intended that these
existing relationships can also be used for purposes of Order Audit
System reports. NASDR specifically solicits comment on costs or
difficulties that could be involved in amendment existing clearing and
reporting
[[Page 47104]]
relationships to encompass reporting obligations under Rule 6950.
Rule 6960--Violation of order audit system rules. Rule 6960
provides that failure to comply with any of the requirements set forth
in the Proposed Rules may be considered conduct that is inconsistent
with high standards of commercial honor and just and equitable
principles of trade, in violation of NASD Rule 2110. This provision
emphasizes the importance of the Order Audit System to the regulatory
mission of the Association and NASDR. NASDR believes that violations of
the Proposed Rules that may be deemed to be violations of Rule 2110 of
the Conduct Rules would include patterns of persistent or repeated
violations, or submissions of inaccurate reports. Ordinarily, cases of
isolated or inadvertent violations would not be considered to be
violations of Rule 2110 but could be subject to specified fines imposed
in an expedited process. In this regard, NASDR specifically solicits
comment on whether the Proposed Rules should be included among the
rules subject to the disciplinary penalties and procedures contained
Rule 9217 and IM-9217 of the NASD Code of Procedure.\7\
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\7\ See also Rule 476A and Supplementary Material of the New
York Stock Exchange Guide for comparable rules of the New York Stock
Exchange.
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Rule 6970--Effective date. NASDR is proposing that the requirements
of Rule 6930 be effective for all members on February 2, 1998. This
proposed effective date pre-dates by approximately six months the
proposed application to certain Orders of the other Proposed Rules.
Because the synchronization requirement is designed to ensure the
accuracy of times of events that are recorded for regulatory purposes,
including under current regulations, the requirement has a purpose that
is broader that the accurate recordation of times pursuant to the
Proposed Rules. Accordingly, NASDR preliminarily believes that it may
be appropriate to implement this requirement as soon as is feasible. In
addition, an earlier implementation of the requirement could provide
NASDR with experience that could be useful in preparing for the
implementation of the Order Audit System. NASDR specifically solicits
comment on the feasibility of this implementation date, based on any
necessary enhancements to existing systems that would be required. In
particular, comments should address the extent to which manual or
``punch'' clocks current are in use for purposes of complying with
regulatory requirements, and the extent to which business clocks now
record in seconds, or the timetable for any existing plans to upgrade
these clocks.
Because of the substantial compliance burdens that will be
associated with systems and other changes in order to permit member
firms to record and report all the information that would be required
under the Proposed Rules, as noted above, NASDR is proposing to apply
the requirements on August 8, 1998 only to Orders that are captured by
members in electronic form upon or promptly after receipt (``electronic
orders''). Where Orders presently are communicated by telephone or some
other means but are routinely entered into an electronic data base as
soon they are received, NASDR preliminarily believes that its is
appropriate to treat these Orders in the same way as if they were
transmitted directly in electronic form. NASDR solicits comment on
whether this treatment is appropriate.
In addition, a January 1, 1999 implementation date would apply to
Orders that are not communicated or routinely entered electronically
(``non-electronic orders''), where they are received at the trading
desk by members that are market makers in the subject securities. Under
this provision, only certain information items initially would be
required to be recorded and reported to the Order Audit System. These
information items in general correspond to those items that are
expected to be generally available at the trading desk at the time that
Orders are received. Specifically, the required items include: the
order identifier assigned to the Order by the market maker; the date
and time on which the Order was originated or received; the member
identification symbol assigned by the Association; the identification
of the Reporting Member's Reporting Agent, where applicable; the symbol
assigned by the Association to the securities that are the subject of
the Order; where applicable, the designation of the order as a short
sale; whether the Order is to buy or sell; the quantity of shares; the
designation of the time in force that applies to the Order; the
expiration date; the type of account for which the Order is submitted;
any request by a customer that a limit order not be displayed or that a
block order be displayed pursuant to Rule 11Ac1-4(c) of the Exchange
Act: the designation of the type of Order (market, limit, stop, or stop
limit); the designation of any stop or limit price; any designation of
a minimum number of shares that must be executed; any special handling
instructions; where a member receives an Order from another member, the
order identifier assigned to the Order by the member that transmits the
Order, the member identification symbol assigned by the Association to
the member that transmits the Order, and the date the Order was first
originated or received by the member that transmits the Order; and
other relevant information when the order is executed, canceled,
modified or transmitted to another member. As noted above, data
concerning all Orders that are not received electronically will be
required to be captured manually immediately after receipt and recorded
intra-day in electronic form.
NASDR is not proposing to require initially that the identification
of each trader who executes non-electronic Orders received at the
trading desk of a market maker be recorded. However, NASDR is proposing
an amendment to Rule 3110 to require that this item be recorded in some
form, so that this information can be available for regulatory purposes
on request.
As noted above, the proposed inclusion of these Orders in the Order
Audit System by January 1, 1999 reflects the important role that market
makers play in the market for Nasdaq securities and the paramount
regulatory and surveillance interest in assuring that market makers
comply with all of their obligations. At the same time, the proposal to
reduce the number of elements that must be captured initially by market
makers when receiving telephone or other non-electronic orders
recognizes that requiring the manual transcription of all data
elements, including those that may not be immediately available to a
registered person at the trading desk, in a form that can be reported
to the Order Audit System could impede an orderly and efficient
implementation of the Order Audit System. In particular, this provision
recognizes the unique nature of market maker trading desks, in terms of
the volume of Orders processed and the attendant difficulties that
could result in attempting to record and report the specified
information during periods of high volume and changing market
conditions.
Following finalization of the system configuration and requirements
based on Commission approval, substantial systems development and
testing will be required prior to August 8, 1998. NASDR may seek a
representative group of member firms to participate in early testing
and in a voluntary pilot program in advance of the effective date in
order to identify problems and gain insight into reporting patterns and
volumes. NASDR will provide periodic notices to its members prior to
the effective date
[[Page 47105]]
with regard to these development activities.
Rule 6970 propose to apply the Order Audit System requirements on
January 31, 2000 to all Orders. Accordingly, non-electronic Orders,
whether recorded at a market maker trading desk or at another location
would be fully subject to all of the recording and reporting
requirements of the Proposed Rules on such date. NASDR solicits comment
on this issue and on the implementation schedule generally, based on
system changes or other factors that would apply to members that do not
presently maintain systems for electronic receipt and routing, and on
any associated cost estimates.
NASDR believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act \8\ in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, 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
by creating an Order Audit System that would provide a substantially
enhanced body of information regarding orders and transactions that
would improve the NASDR's ability to conduct surveillance and
investigations of member firms for violations of Association rules. In
addition, the implementation of the Order Audit System would directly
fulfill one of the undertakings contained in the SEC Order relating to
the effectuation of the Association's regulatory responsibilities.
Pursuant to the SEC Order, the Association agreed to undertake to
design and implement by August 8, 1998 (or as specified by further
Order of the Commission) an audit trail sufficient to enable the
Association to reconstruct markets promptly, conduct efficient
surveillance and enforce its rules.
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\8\ 15 U.S.C. Sec. 78o-3.
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASD Regulation 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
In the process of developing the proposed rule change, NASDR
consulted generally with industry representatives and received a number
of comment letters in connection with this consultation. Such comment
letters are available from NASDR upon request.
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, 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-97-56 and
should be submitted by September 26, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 97-23602 Filed 9-4-97; 8:45 am]
BILLING CODE 8010-01-M