[Federal Register Volume 64, Number 213 (Thursday, November 4, 1999)]
[Notices]
[Pages 60256-60259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28874]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42073; File No. SR-NASD-99-62]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change and Amendment No.
1 to the Proposed Rule Change by the National Association of Securities
Dealers, Inc., Relating to Trade Reporting of Listed Securities
October 28, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 20, 1999, the National Association of Securities Dealers,
Inc. (``NASD''), through its wholly-owned subsidiary, The Nasdaq Stock
Market, Inc. (``Nasdaq'') 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
Nasdaq. On October 28, 1999, Nasdaq filed an amendment to the proposed
rule change.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons, and to grant accelerated approval to the proposed rule change,
as amended, on a pilot basis through March 1, 2000.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Thomas P. Moran, Assistant General Counsel,
Nasdaq, to Belinda Blaine, Associate Director, Division of Market
Regulation, SEC, dated October 28, 1999 (``Amendment No. 1''). In
Amendment No. 1, Nasdaq changes the start date for mandatory 90-
second trade reporting for listed securities from October 25, 1999
to November 15, 1999. Nasdaq also notes it will make available its
ITS/CAES system until 6:30 pm. Eastern Time beginning on or about
October 29, 1999. Finally, Nasdaq states it will coordinate with
both the New York Stock Exchange (``NYSE'') and the American Stock
Exchange (``AMEX'') regarding the dissemination of material news by
those exchanges' listed companies during the 4:00 p.m. to 6:30 p.m.
time period, and will, if appropriate, initiate trading and
quotation halts in the Third Market in consultation with those
markets.
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[[Page 60257]]
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) under the Act,\4\
Nasdaq is filing a proposed rule change to mandate 90-second trade
reporting for over-the-counter transactions in listed securities that
take place between 4:00 p.m. and 6:30 p.m. Eastern Time. This rule
change will conform the trade reporting obligations for transactions
involving listed securities with those for Nasdaq National Market,
SmallCap, Convertible Debt and over-the-counter equity issues that were
amended as part of a separately proposed pilot program extending the
availability of several Nasdaq services and facilities until 6:30 p.m.
Eastern Time.\5\ Below is the text of the proposed rule change.
Proposed new language is italicized; proposed deletions are in
brackets.
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\4\ 15 U.S.C. 78s(b)(1).
\5\ See Securities Exchange Act Release No. 42003 (October 13,
1999) (SR-NASD-99-57). In SR-NASD-99-57, Nasdaq proposed, and the
SEC approved, the following changes (in italics) to NASD Rule 4617:
4617. Normal Business Hours
A Nasdaq market maker shall be open for business as of 9:30 a.m.
Eastern Time and shall close no earlier than 4:00 p.m. Eastern Time.
Should a market maker wish to voluntarily remain open for business
later than 4:00 p.m. Eastern Time, it shall so notify the Nasdaq
Market Operations via a Nasdaq terminal and shall close only on the
hour or the half hour, but no later than 6:30 p.m. Eastern Time.
Nasdaq market makers whose quotes are open after 4:00 p.m. Eastern
Time shall be obligated to comply, wihile their quotes are open,
with all NASD Rules that are not by their express terms, or by an
official interpretation of the Association, inapplicable to any part
of the 4:00 p.m. to 6:30 p.m. Eastern Time period.
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* * * * *
6400. Reporting Transactions in Listed Securities
6420. Transaction Reporting
(a) When and How Transactions are Reported
(1) Registered Reporting Members shall transmit through ACT,
within 90 seconds after execution, last sale reports of transactions
in eligible securities executed during the trading hours of the
Consolidated Tape otherwise than on a national securities exchange.
Registered Reporting Members shall also transmit through ACT, within
90 seconds after execution, last sale reports of transactions in
eligible securities executed in the United States otherwise than on
a national securities exchange between 4:00 p.m. and [5:15] 6:30
p.m. Eastern Time. Transactions not reported within 90 seconds after
execution shall be designated as late and such trade reports must
include the time of execution.
(2) (A) No Change.
(B) Non-registered Reporting Members shall, within 90 seconds
after execution, transmit through ACT or the ACT Service Desk (if
qualified pursuant to Rule 7010(i), or if ACT if unavailable due to
system or transmission failure, by telephone to the Nasdaq Market
Operations Department, last sale reports of transactions in eligible
securities executed in the United States otherwise than on a
national securities exchange between the hours of 4:00 p.m. and
[5:15] 6:30 p.m. Eastern Time. Transactions not reported within 90
seconds after execution shall be designated as late and such trade
reports must include the time of execution.
(3)(A) All members shall report transactions in eligible
securities executed outside the hours of 9:30 a.m. and [5:15] 6:30
p.m. Eastern Time as follows:
(i) by transmitting the individual trade reports through ACT on
the next business day (T+1) between 8:00 a.m. and [5:15] 6:30 p.m.
Eastern Time;
(ii) No Change; and
(iii) No Change.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Nasdaq 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 III below. Nasdaq 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
In Nasdaq's third market, NASD members trade stocks listed on the
NYSE and AMEX using Nasdaq's quotation, communication and execution
system. The NASD collects quotations from broker-dealers that trade
these securities over-the-counter and provides such quotations to the
Consolidated Quotation System (``CQS'') for dissemination.
Additionally, the NASD collects trade reports to the Consolidated Tape
Association (``CTA'') for inclusion in the Consolidated Tape. From 9:30
a.m. to 4:00 p.m. Eastern Time, NASD members registered as CQS market
makers use Nasdaq's Computer Assisted Execution System (``CAES'') to
access the quotes of other CQS market makers and the Intermarket
Trading System (``ITS'') to access the quotes of other U.S. exchanges.
Trades executed through Nasdaq's ITS/CAES system are automatically
forwarded to ACT for trade reporting purposes. Pursuant to NASD Rule
6340, participation as a CQS market maker between 4:00 p.m. and 6:30
p.m. Eastern Time is strictly voluntary.
In response to requests from Nasdaq CQS market makers that wish to
have the option of expanding their trading activity after 4:00 p.m.
Eastern Time, Nasdaq has determined to expand, until 6:30 p.m. Eastern
Time, the availability of ITS/CAES and ACT services for listed
securities effective October 29, 1999. This expansion will be on a
pilot basis beginning October 29, 1999 and terminating on March 1,
2000. Participation in the Third Market after 4:00 p.m. Eastern Time
will continue to be voluntary.
Currently, NASD rules mandate submission of trade reports in listed
securities within 90 seconds after execution only until 5:15 p.m.
Eastern Time. In order to conform listed trade reporting obligations
with those for Nasdaq National Market, SmallCap, Convertible Debt and
over-the-counter equity securities, Nasdaq is proposing to modify its
ACT trade reporting rules to require 90-second trade reporting of
listed securities until 6:30 p.m. Eastern Time. By extending 90-second
listed trade reporting to 6:30 p.m. Eastern Time, the rule will be
consistent with the Normal Business Hours of the CQS. In addition,
expansion of listed trade reporting obligations to 6:30 p.m. Eastern
Time will allow NASD member firms to modify their Nasdaq-related trade
reporting programming to the same time parameters. To allow sufficient
time for NASD members to modify their internal systems to comply with
the expansion of 90-second trade reporting for listed securities,
Nasdaq requests that, like its 90-second trade reporting rules for
Nasdaq securities, its proposed changes to NASD Rule 6240 not take
effect until November 15 1999. All member firms participating in the
Third Market are expected, however, to report trades as soon as
possible after execution and, to the extent they are able to do so
before November 15, 1999, within 90 seconds.
In addition, Nasdaq will make available, on or about October 29,
1999, its ITS/CAES system until 6:30 p.m. Eastern Time. Operation of
Nasdaq's ITS/CAES system beyond its current 4:00 p.m. close will be
consistent with all rules and procedures that are currently applicable
to ITS/CAES trading and quotation activity during the 9:30 a.m. to 4:00
p.m. Eastern Time period.
Finally, Nasdaq has agreed to coordinate with both NYSE and AMEX
regarding the dissemination of material news by their listed companies
during 4:00 p.m. to 6:30 p.m. Eastern Time, and will, if appropriate,
initiate trading and
[[Page 60258]]
quotation halts in the Third Market in consultation with those markets.
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 15A(b)(6) of the Act \6\ in that it is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities.
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\6\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609.
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 No. SR-NASD-99-62 and should
be submitted by November 26, 1999.
IV. Commission's Findings and Order Granting Accelerated Approval
of the Proposed Rule Change
The Commission has reviewed carefully the NASD's proposal,\7\ and
for the reasons discussed below, finds that the proposed rule change,
as amended, is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to the NASD and, in
particular, the requirements of Sections 11A and 15A.\8\
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\7\ In approving this rule, the Commission has considered the
proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78k-1 and 78o-3.
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Specifically, the Commission finds that the proposed rule change
furthers the goals of the national market system as reflected in
Sections 11A(a)(1)(C)(iii) and (iv) of the Act.\9\ Congress found in
those provisions that it is in the public interest and appropriate for
the protection of investors and the maintenance of fair and orderly
markets to assure the availability to brokers, dealers, and investors
of information with respect to quotations for and transactions in
securities, and to assure the practicability of brokers executing
investors' orders in the best market. Section 11A(a)(1) further
provides that the linking of all markets for qualified securities
through communication and data processing facilities would foster
efficiency, enhance competition, increase the information available to
brokers, dealers, and investors, facilitate the offsetting of
investors' orders, and contribute to best execution of such orders. The
proposed rule will make available with respect to listed securities the
same trade reporting information currently available for transactions
involving Nasdaq National Market, SmallCap, Convertible Debt and over-
the-counter equity issues until 6:30 p.m. Eastern Time. The proposed
rule will enhance transparency in the after-hours market, allowing
investors an opportunity to better evaluate the after-hours market
before deciding to participate. Ultimately, the proposed rule should
enhance investor protection and confidence, because it will provide
more complete information upon which to base trading decisions.
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\9\ 15 U.S.C. 78k-1(a)(1)(C)(iii) and (iv).
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The Commission finds that the proposed rule change is consistent
with Section 15A of the Act in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, 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. The proposal accomplishes
these objectives by extending to listed securities Nasdaq's systems, so
that market participants who choose to offer trading to customers in
the after-hours market reap the benefits of greater transparency, and
linkage of the various market participants engaged in after-hours
trading through ITS/CAES.
Nasdaq has requested that the Commission find good cause pursuant
to Section 19(b)(2) of the Act \10\ for approving the proposed rule
change prior to the 30th day after publication in the Federal Register.
The Commission finds good cause for granting accelerated approval for
the proposed rule change because the pilot will benefit investors by
improving the transparency of the after-hours market and assisting
broker-dealers in fulfilling their duty of best execution for their
customer orders.
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\10\ 15 U.S.C. 78s(b)(2).
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The Commission further finds that good cause exists for approving
Amendment No. 1 to the proposed rule change prior to the thirtieth day
after the date of publication of notice thereof in the Federal
Register. The first item in Amendment No. 1 merely changes the start
date for mandatory 90-second trade reporting for listed securities
until 6:30 p.m. Eastern Time from October 25, 1999, to November 15,
1999. The second item in Amendment No. 1 makes Nasdaq's ITS/CAES,
system available until 6:30 p.m. Eastern Time beginning on or about
October 29, 1999. The filing originally stated that ITS/CASES would not
be available until on or about November 8, 1999. Finally, in Amendment
No. 1, Nasdaq states it will coordinate with both the NYSE and the AMEX
regarding the dissemination of material news by those exchanges' listed
companies during 4:00 p.m. to 6:30 p.m. Eastern Time, and will, if
appropriate, initiate trading and quotation halts in the Third Market
in consultation with those markets. The availability of ITS/CAES during
the 4:30 p.m. to 6:30 p.m. Eastern Time period, and the coordination
with the NYSE and AMEX regarding trading halts, further ensure investor
protection. Accordingly, the Commission believes that there is good
cause for accelerating the approval of all of the items in Amendment
No. 1.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (SR-NASD-99-62), as amended, is
approved as a pilot program through March 1, 2000.
\11\ Id.
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[[Page 60259]]
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-28874 Filed 11-3-99; 8:45 am]
BILLING CODE 8010-01-M