[Federal Register Volume 59, Number 146 (Monday, August 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18581]


[[Page Unknown]]

[Federal Register: August 1, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34428; File No. SR-NASD-94-31]

 

Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving Proposed Rule Change to Eliminate Access 
Market Maker Procedures From Schedule D to the NASD By-Laws

July 22, 1994.
    On May 25, 1994, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association'') filed with the Securities and 
Exchange Commission (``SEC'' or ``Commission'') a proposed rule change 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 thereunder.\2\ The rule change eliminates 
access market maker procedures from Schedule D to the NASD By-Laws.\3\
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    \1\15 U.S.C. 78s(b)(1)
    \2\17 CFR 240.19b-4
    \3\NASD Manual, Schedules to the By-Laws, Schedule D, Part IX, 
(CCH) 1864.
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    Under the rule as amended, member firms that do not subscribe to 
Level III service will no longer be able to qualify for access market 
maker status. Prior to the amendment, a firm, with NASD approval, could 
enter into an agreement with a Level III subscriber whereby the 
subscriber would input two-sided quotations reflecting the dealer 
interest of the non-subscribing firm. These quotations would be 
displayed with the entering subscriber's market maker identifier along 
with a special indicator which would inform other dealers that an 
access arrangement existed with respect to the quotation displayed. 
While the entering subscriber assumed responsibility for executing 
trades at the displayed bid and offer, the entering subscriber and the 
access market maker were jointly responsible for compliance with the 
various market maker obligations as set forth in Part V of Schedule D 
to the NASD By-Laws. The effect of the amendment to the rule is to 
limit market maker participation to Level III service subscribers.
    Notice of the proposed rule change, as amended, together with its 
terms of substance was provided by issuance of a Commission release\4\ 
and by publication in the Federal Register.\5\ No comments were 
received in response to the Notice. This order approves the proposed 
rule change.
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    \4\Securities Exchange Act Rel. No. 34217 (June 15, 1994).
    \5\59 FR 32032 (June 21, 1994).
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    As the NASD indicated in its rule filing, changes in market making 
practices in recent years have dramatically reduced the use of the 
access market maker arrangement. In fact, at the time the NASD filed 
the proposed rule change, no NASD member was using the arrangement. The 
NASD concluded that the changes in practices and lack of interest 
reflected the obsolescence of the access market maker provision. The 
NASD also noted that limiting market maker participation to Level III 
service will enhance the audit trail and fix the responsibility for 
every quotation and reported transaction at the source.
    The Commission has determined to approve the NASD's proposal. The 
Commission finds that the rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to the NASD, including the requirements of Sections 
15A(b)(6) and 15A(b)(11) of the Act.\6\ Section 15A(b)(6) requires, in 
part, that the rules of the NASD be designed to prevent fraudulent and 
manipulative acts and practices; to foster cooperation and coordination 
with persons engaged in regulating, clearing, and processing 
information with respect to, and facilitating transactions in 
securities; and to protect investors and the public interest. Section 
15A(b)(11) authorizes the NASD to adopt rules governing the form and 
content of quotations disseminated by member firms for the purposes of 
providing fair and informative quotations, preventing fictitious or 
misleading quotations, and promoting orderly procedures for collecting 
and distributing quotation information.
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    \6\15 U.S.C. 78o-3(b)(6) and (b)(11).
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    The Commission finds that the elimination of the access market 
maker feature is consistent with the foregoing statutory provisions. 
This amendment will require market maker to subscribe to Level III 
service in order to enter quotations into the Nasdaq system This 
requirement will eliminate an extra step in the quotation process and 
further, inter alia, the objectives of facilitating transactions and 
promoting orderly procedures for collecting and distributing quotation 
information.
    The Commission does not believe that the 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.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change SR-NASD-94-31 be, and hereby is, 
approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\17 CFR 200.30-3(a)(12).

[FR Doc. 94-18581 Filed 7-29-94; 8:45 am]
BILLING CODE 8010-01-M