[Federal Register Volume 59, Number 125 (Thursday, June 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15933]


[[Page Unknown]]

[Federal Register: June 30, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34254]

 

Self-Regulatory Organizations; Notice and Immediate Effectiveness 
of Proposed Rule Change by the National Association of Securities 
Dealers, Inc. Relating to Initial Quotations of Initial Public 
Offerings

June 24, 1994.
    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 June 15, 
1994 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, II, and III below, which Items have been prepared by the NASD. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD is proposing to implement a change to its existing 
practice and procedures regarding quotations and the commencement of 
trading in Nasdaq securities newly listed after an initial public 
offering (``IPO'') that permit a five minute quotation-only time period 
prior to the commencement of trading in the IPO.

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 is proposing to change the current policies and practices 
by which initial quoting and trading of new issues are conducted in The 
Nasdaq Stock Market. Under the proposed change, when an IPO is first 
authorized for inclusion in the Nasdaq Stock Market, the system will 
display the time of day when quoting in the issue may begin and a time 
of day when trading in that issue may begin. Specifically, when a new 
security is released for trading, the window for quotations has been 
set to allow market makers a period of five minutes to enter and adjust 
their quotations prior to the commencement of trading. This quotation 
period should assist the market makers in determining the appropriate 
opening price. Currently, when an IPO is authorized for trading on 
Nasdaq, market makers are permitted to immediately and simultaneously 
enter quotations and trade on the subject security.
    The proposed quotation-only period for IPOs is similar to the 
display of quotations that occurs prior to the opening of the Nasdaq 
Stock market. As with the pre-opening quotation period that occurs 
daily in the Nasdaq Stock Market, the proposed quotation-only period 
should provide market makers with the opportunity to adjust their 
quotations and to present a better quotation when the market opens for 
trading. Because it may be difficult at times to accurately gauge 
interest in an IPO, quotes and trades in the IPO may be subject to 
excessive volatility. This ``IPO Quote Window'' should permit a more 
orderly market to develop prior to its release for actual trading.
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act, which requires, among 
other things, that the rules of the Association remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and Section 15A(b)(11), which provides that the rules of 
the Association relating to quotations should be designed to produce 
fair and informative quotations, to prevent fictitious or misleading 
quotations, and to promote orderly procedures for collecting, 
distributing, and publishing quotations.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The NASD 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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and subparagraph (e) of Rule 19B-4 thereunder 
because the proposal constitutes a change to its stated practices 
regarding the administration and operation of existing quotation rules. 
At any time within 60 days of the filing rule change if it appears to 
the Commission that such action is necessary or appropriate in the 
public interest, for the protection of investors, or otherwise in 
furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the submission, all subsequent 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 July 21, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\1\
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    \1\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-15933 Filed 6-29-94; 8:45 am]
BILLING CODE 8010-01-M