[Federal Register Volume 59, Number 81 (Thursday, April 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10125]


[Federal Register: April 28, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33946; International Series Release No. 659; File No. 
SR-NASD-94-23]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc. Notice of Filing and Order Granting Accelerated Temporary 
Approval of Proposed Rule Change Relating to the Quotation Linkage With 
the London Stock Exchange

April 21, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 12, 1994, the 
National Association of Securities Dealers, Inc. (``NASD'' or 
``Association'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the NASD. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    On October 2, 1987, the Commission issued an order approving 
operation of a market information linkage between the NASD and the 
London Stock Exchange (``LSE'') (formerly, the International Stock 
Exchange of the United Kingdom and the Republic of Ireland) for a pilot 
term of two years.\2\ This experimental linkage supports an interchange 
of quotation information (``linkage information'') on about 740 
securities (``linkage securities''); of that total, each marketplace 
has designated approximately half as its ``pilot group'' of linkage 
securities. NASD and LSE members that function as market makers in one 
or more of a subset of linkage securities that are quoted in both the 
Nasdaq and LSE dealer systems (``common issues'') are entitled to 
access linkage information without paying a separate charge to receive 
it. Operation of the linkage in this fashion comports with the terms of 
the Commission's October 1987 Order. Most recently, the Commission 
authorized an extension of this pilot linkage through May 5, 1994, by 
approving File No. SR-NASD-93-55.\3\
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    \2\Securities Exchange Act Release No. 24979 (Oct. 2, 1987), 52 
FR 37684 (Oct. 8, 1987) (the ``October 1987 Order'').
    \3\Securities Exchange Act Release No. 33060 (Oct. 15, 1993), 58 
FR 54616 (Oct. 22, 1993).
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    Pursuant to Section 19(b)(1) of the Act and Rule 19b-4 thereunder, 
the NASD hereby files this proposed rule change to obtain Commission 
approval for continuation of the NASD/LSE pilot linkage through October 
31, 1994.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the NASD included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The NASD has prepared summaries, set forth in Sections 
(A), (B), and (C) below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of this rule filing is to obtain an extension of the 
Commission's interim approval of the NASD/LSE linkage through October 
31, 1994. Absent an extension, authorization for the linkage will 
expire as of May 5, 1994.
    For some time now, the sponsors of this linkage have considered 
various possibilities for its future development in meeting the needs 
of the international investment community. Both markets have also 
launched major initiatives to migrate their core processing and 
communications facilities to state-of-the-art technologies that will 
yield operational efficiencies and enhanced capacity. In this 
connection, the LSE has notified the NASD that the progression of the 
LSE's technology migration will foreclose continued operation of the 
NASD/LSE linkage after October 31, 1994. Accordingly, the NASD is 
requesting that the Commission extend its interim approval of the NASD/
LSE linkage through October 31, 1994. The NASD does not anticipate 
further extension beyond that date.
    The NASD submits that the statutory basis for the NASD/LSE pilot 
linkage and the requested extension thereof, are contained in 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, the availability of 
information with respect to quotations for securities and the execution 
of investor orders in the best market through the application of new 
data processing and communications techniques. Section 15A(b)(6) 
requires, among other things, that the rules of the NASD be designed to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, and to remove impediments to 
and perfect the mechanism of a free and open market. The NASD believes 
that the requested extension of the linkage's temporary authorization 
is fully consistent with the policy goals reflected in these statutory 
provisions.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In its original release announcing interim approval of the NASD/LSE 
pilot linkage, the Commission referenced certain competitive concerns 
raised by Instinet Corporation (``Instinet'') through counsel.\4\ In 
response, the NASD, after consultation with the LSE, made a good faith 
effort to address those concerns by narrowing the universe of firms and 
terminals permitted access to linkage information at no cost. Those 
changes were reflected in File No. SR-NASD-87-20, which the Commission 
approved by issuing the October 1987 Order. With respect to File No. 
SR-NASD-89-44 (which resulted in extension of the linkage's 
authorization until December 1, 1990), the NASD also submitted 
statistical and cost information relative to its participation in the 
pilot project. Given that the NASD/LSE linkage will be terminated on or 
shortly before October 31, 1994, the NASD believes that the instant 
rule change will not result in any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \4\See Securities Exchange Act Release No. 23158 (Apr. 21, 
1986), 51 FR 15989 (Apr. 29, 1986). See also letter from Daniel T. 
Brooks, Counsel for Instinet, to John Wheeler, Secretary, SEC (Apr. 
16, 1986).
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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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The NASD requested that the Commission find good cause for 
approving this proposed rule change prior to the 30th day following 
publication of notice of the filing in the Federal Register, and, in 
any event, by May 5, 1994, the expiration of the linkage's present 
authorization. The NASD believes that the requested extension of the 
pilot period is fully consistent with the statutory provisions and 
policy goals referenced in Section II of this Rule 19b-4 filing. 
Moreover, the NASD argued the additional time will enable the 
sponsoring markets to effect an orderly termination of this 
experimental project. Under the circumstances, the Commission finds 
that allowing the NASD/LSE linkage to cease abruptly would be 
counterproductive.
    The Commission finds that the proposed rule change 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(a)(1) (B) and (C) and 15A(b)(6), and the rules and 
regulations thereunder.
    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. Accelerated approval will avoid an unnecessary 
interruption of the pilot linkage while allowing the NASD and LSE to 
provide for an orderly termination of this experimental program in the 
final quarter of 1994.\5\ Accordingly, under these circumstances, the 
Commission believes the NASD/LSE linkage should be permitted to 
continue operating, without a hiatus, for a brief period sufficient to 
bridge the migration to new technologies being developed by the 
sponsoring markets.
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    \5\The NASD has represented that it will provide notice to its 
subscribers of the termination of the NASD/LSE linkage in its 
Subscriber Bulletin no later than August 30, 1994. Telephone 
conversation between Michael Kulczak, Associate General Counsel, 
NASD, with Michael Ryan, Attorney, SEC (Apr. 19, 1994).
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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 in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to the file number in the caption 
above and should be submitted by May 19, 1994.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change be, and hereby is, approved for an 
additional period, inclusive of October 31, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-10125 Filed 4-26-94; 8:45 am]
BILLING CODE 8010-01-M