[Federal Register Volume 62, Number 199 (Wednesday, October 15, 1997)]
[Notices]
[Pages 53673-53674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27280]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39216; File No. SR-NASD-97-72]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the National
Association of Securities Dealers, Inc., Relating to Extension of the
Nasdaq International Service Pilot Program
October 7, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on September 30, 1997, the
National Association of Securities Dealers, Inc. (``NASD'' or
``Association'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested parties
and approving this proposal on an accelerated basis.
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\1\ 15 U.S.C. Sec. 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 proposes to extent for one year, until October 9, 1998:
(1) The pilot term of the Nasdaq International Service (``Service'');
and (2) the effectiveness of certain rules (``International Rules'')
that are unique to the Service. The proposal does not entail any
modification of the International Rules. The present authorization for
the Service and the International Rules expires on October 11, 1997.
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 NASD proposes to extend for one year, until October 9, 1998,
the pilot operation of the Service and the effectiveness of the
International Rules governing broker-dealers' access to and use of the
Service. The existing pilot operation of the Service and the
International Rules was originally authorized by the Commission in
October 1991 \2\ and the Service was launched on January 20, 1992. The
pilot has since been extended \3\ and is set to expire on October 11,
1997.\4\
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\2\ See Securities Exchange Act Release No. 29812 (October 11,
1991), 56 FR 52082 (October 17, 1991) (order approving File No. SR-
NASD-90-33) (``Pilot Approval Order'').
\3\ See Securities Exchange Act Release No. 33037 (October 8,
1993), 58 FR 53752 (October 18, 1993) (order approving File No. SR-
NASD-93-50) (extending the pilot operation of the Service for two
years through October 11, 1995).
\4\ See Securities Exchange Act Release No. 36359 (October 11,
1995), 60 FR 53820 (October 17, 1995) (order approving File No. SR-
NASD-95-46) (extending the pilot operation of the Service for two
years through October 11, 1997).
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The Service supports an early trading session running from 3:30
a.m. to 9:00 a.m. Eastern Time (``ET'') on each U.S. business day
(``European Session'') that overlaps the business hours of the London
financial markets. Participation in the Service is voluntary and is
open to any authorized NASD member firm or its approved broker-dealer
affiliate in the U.K. A member participates as a Service market maker
either by staffing its trading facilities in the U.S. or the facilities
of its approved affiliate during the European Session. The Service also
has a variable opening feature that permits Service market makers to
elect to participate starting from 3:30 a.m., 5:30 a.m., or 7:30 a.m.
ET. The election is required to be made on a security-by-security basis
at the time a firm registers with the NASD as a Service market
maker.\5\ At present, there are no Service market makers participating
in the Service.
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\5\ Regardless of the opening time chosen by the Service market
maker, the Service market marker is required to fulfill all of the
obligations of a Service market maker from that time (i.e., 3:30
a.m., 5:30 a.m., or 7:30 a.m. ET) until the European Session closes
at 9:00 a.m. ET. See Securities Exchange Act Release No. 32471 (June
16, 1993), 58 FR (June 22, 1993) (order approving File No. SR-NASD-
92-54).
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As noted above, the NASD is seeking to extend the pilot term for
one year. During this period, the NASD will continue to evaluate the
Service's operation and consider possible enhancements to the Service
to broaden
[[Page 53674]]
market marker participation. The NASD views the Service as a
significant experiment in expanding potential opportunities for
international trading via systems operated by the Nasdaq Stock Market,
Inc. (``Nasdaq''). Accordingly, The NASD believes that this pilot
operation warrants an extension to permit possible enhancements that
will increase the Service's utility and attractiveness to the
investment community.\6\ The NASD believes it is extremely important to
preserve this facility and the opportunities it provides, especially in
light of the increasingly global nature of the securities markets and
the trend of cross-border transactions generally.
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\6\ Assuming that the pilot term is extended, the NASD will
continue to supply the Commission with the statistical report
prescribed in the initial Pilot Approval Order for the Service at
six-month intervals.
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In addition, the Service serves an invaluable role as a critical
early warning mechanism in the context of significant changes involving
Nasdaq software and hardware systems. Specifically, because the Service
operates in the early morning hours prior to the opening of trading in
the domestic session of Nasdaq, the Service has provided for the early
detection of systems or communications problems when Nasdaq implements
these systems changes.
The NASD believes that the proposed rule change is consistent with
Sections 11A(a)(1) (B) and (C) and 15A(b)(6) of the Act. Subsections
(B) and (C) of Section 11A(a)(1) set forth the Congressional goals of
achieving more efficient and effective market operations, broader
availability of information with respect to quotations for securities,
and the execution of investor orders in the best market through the use
of advanced data processing and communications techniques. Section
15A(b)(6) requires, among other things, that the NASD's rules be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principals of trade, and to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities. The NASD believes that the
proposed extension of the Service and the International Rules is fully
consistent with these statutory provisions.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The NASD believes that the proposed 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. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The NASD has requested that the proposed rule change be given
accelerated effectiveness pursuant to Section 19(b)(2) of the Act so
that the operation of the pilot program for the Service may continue on
an uninterrupted basis. In addition, as noted above, the NASD's
proposal entails no modification to the International Rules or the
Service, which previously were subject to the full notice comment
period required by Section 19(b) of the Act when they were approved
originally by the Commission. Accordingly, the NASD believes good cause
exists to extend the effectiveness of the pilot program for the Service
on an accelerated basis.
The Commission finds that the proposed rule change is consistent
with sections 11A(a)(1) (B) and (C) and 15A(b)(6) of the Act. Sections
11A(a)(1) (B) and (C) of the act set forth the Congressional goals of
achieving more efficient and effective market operations, broader
availability of information with respect to quotations for securities,
and the execution of investor orders in the best market through the use
of advanced data processing and communications techniques. Section
15A(b)(6) requires, among other things, that the NASD's rules be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principals of trade, and to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities.
The Commission continues to view the Service as a significant
experiment in expanding potential opportunities for international
trading via systems operated by Nasdaq. Although there are no market
makers participating currently in the Service, the NASD plans to
reevaluate the Service's operation and consider possible enhancements
to the Service to broaden market maker participation. In addition, the
NASD has stated that the Service has played a valuable role by
providing for the early detection of systems or communications problems
when Nasdaq implements significant changes in its hardware and software
systems. Accordingly, the Commission believes that the pilot program
warrants an extension to permit possible enhancements that will
increase the Service's utility to the investment community.\7\ The NASD
must file any changes to the operation of the Service with the
Commission pursuant to Section 19(b)(2) of the Act.
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\7\ The NASD continues to be responsible for supplying the
Commission with the statistical reports prescribed in the initial
Pilot Approval Order at six-month intervals. However, the supporting
documentation is no longer required, unless otherwise requested by
the Commission.
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The Commission finds good cause for approving the proposed rule
change prior to the 30th day after the date of publication of notice of
filing thereof in order to ensure the continuous operation of the
Service through October 9, 1998. The current authorization for the
Service expires on October 11, 1997.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, 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. Copies of the filing will also be
available for inspection and copying at the principal office of the
NASD. All submissions should refer to File No. SR-NASD-97-72 and should
be submitted by November 5, 1997.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-NASD-97-72) is approved
through October 9, 1998.
\8\ 15 U.S.C. Sec. 78f(b)(2) (1988).
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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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-27280 Filed 10-14-97; 8:45 am]
BILLING CODE 8010-01-M