[Federal Register Volume 59, Number 176 (Tuesday, September 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-22575]


[[Page Unknown]]

[Federal Register: September 13, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34632; File Nos. SR-Amex-94-21, SR-CBOE-94-10, SR-NYSE-
94-22, SR-PSE-94-16, and SR-Phlx-94-09]

 

Self-Regulatory Organizations; Order Approving Proposed Rule 
Change of the Chicago Board Options Exchange, and Notice of Filing and 
Order Granting Accelerated Approval of Proposed Rule Changes and 
Amendments Thereto by the American Stock Exchange, New York Stock 
Exchange, Pacific Stock Exchange, and Philadelphia Stock Exchange 
Relating to Short Sales of Nasdaq National Market Securities

September 2, 1994.

I. Introduction

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ on March 31, 1994, the 
Chicago Board Options Exchange, Inc. (``CBOE''), on June 1, 1994, the 
Philadelphia Stock Exchange, Inc. (``Phlx''), on June 13, 1994, the 
American Stock Exchange, Inc., on June 16, 1994, the Pacific Stock 
Exchange, Inc. (``PSE''), and on June 27, 1994, the New York Stock 
Exchange (``NYSE''), respectively (each individually referred to herein 
as an ``Exchange'' and two or more collectively referred to as 
``Exchanges''), submitted to the Securities and Exchange Commission 
(``Commission'') proposed rule changes designed to allow their members 
to designate certain short sales of Nasdaq\3\ National Market (``NM'') 
securities\4\ as bid test exempt sales in connection with the bid test 
applicable to short sales of such securities (``bid test rule'' or 
``short sale rule'') recently adopted by the NASD and included in the 
NASD Manual, Rules of Fair Practice (``NASD Rules'').\5\ On May 9, 
1994, the CBOE filed Amendment No. 1;\6\ on June 20, 1994, the Phlx 
filed Amendment No. 1;\7\ on June 21, 1994, the Amex filed Amendment 
No. 1;\8\ on June 30, the PSE filed Amendment No. 1,\9\ and on August 
3, 1994, the Phlx filed Amendment No. 2.\10\ The CBOE proposal was 
published for comment in the Federal Register on May 18, 1994.\11\ No 
comments were received on these proposed rule changes. This order 
approves the Exchanges' proposals and the Exchanges' Amendments.
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    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1993).
    \3\Nasdaq is a computerized system that provides brokers and 
dealers with price quotations for securities traded over the 
counter.
    \4\Nasdaq includes both Nasdaq SmallCap Market and Nasdaq NM 
securities. In July 1993, the NASD began referring to Nasdaq 
National Market System or Nasdaq NMS securities as Nasdaq National 
Market securities.
    \5\See Securities Exchange Act Release No. 34277 (June 29, 
1994), 59 FR 34885 (File No. SR-NASD-92-12).
    \6\In Amendment No. 1, the CBOE removes the term ``NMS 
securities'' and replaces it with ``Nasdaq National Market 
securities,'' National Market securities,'' or ``NM securities.'' In 
addition, Amendment No. 1 confirms that surveillance procedures had 
been or would be implemented by the CBOE in order for the CBOE to be 
deemed a ``qualified Options exchange'' that satisfies the 
requirements of the NASD's short-sale rule (File No. SR-NASD-92-12). 
See letter from Michael L. Meyer, Schiff Hardin & Waite, to Francois 
Mazur, Attorney, Division of Market Regulation (``Division''), 
Commission, dated May 9, 1994. See also Securities Exchange Act 
Release No. 34277, supra note 5.
    \7\See letter from Michele R. Weisbaum, Phlx, to Francois Mazur, 
Attorney, Division, Commission, dated June 16, 1994. The Phlx's 
amendment revises the term ``NMS securities, and refers instead to 
``National Market securities'' or ``NM securities.'' Id.
    \8\See letter from Claire P. McGrath, Managing Director and 
Special Counsel, Derivative Securities, Amex, to Michael Walinskas, 
Branch Chief, Division, Commission, dated June 20, 1994. Amendment 
No. 1 corrects a typographical error made in the original 
submission.
    \9\See letter from Michael D. Pierson, Senior Attorney, Market 
Regulation, PSE, to Francois Mazur, Attorney, Division, Commission, 
dated June 29, 1994. Amendment No. 1 requests the Commission to find 
good cause for accelerating effectiveness of the PSE's proposal.
    \10\See Phlx Amendment No. 2. Amendment No. 2 revises the 
proposal to allow a Phlx specialist to designate all the Nasdaq NM 
securities underlying the options or index options which the 
specialist has been allocated as ``designated'' NM securities. Under 
the original proposal, Phlx specialists were limited to designating 
twenty such securities.
    \11\See Securities Exchange Act Release No. 34049 (May 12, 
1994), 59 FR 25971.
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II. Description of Proposals

A. Introduction

    The Exchanges have submitted substantially similar proposals to the 
Commission to amend their respective rules\12\ so as to coordinate them 
with the NASD's Rules of Fair Practice relating to a bid test 
applicable to short sales of NM securities traded through Nasdaq.\13\ 
The proposals require Exchange members who initiate, accept, or 
transmit for execution, or execute sales of NM securities for the 
account of another Exchange member, to designate such sales as long 
sales, short sales, or bid test exempt sales. Accordingly, NASD members 
who receive orders to sell NM securities from or for the account of 
Exchange members will have a basis to determine whether such sales are 
short sales subject to or exempt from the bid test.\14\
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    \12\CBOE Proposed Rule 15.10; Phlx Proposed Rule 1072; Amex 
Proposed Rule 957(d); and PSE Proposed Rule 4.19.
    \13\The NASD bid test prohibits broker-dealers from effecting 
short sales, for themselves or their customers, at or below the 
``bid'' when the current ``inside'' or best bid is below the 
previous inside bid.
    \14\An executing NASD member is required to make a good-faith 
determination whether an order is long, short, or bid test exempt. 
Thus, an NASD member is prohibited from effecting a short sale for 
the account of a customer or for its own account directly or through 
the offices of a third party for the purpose of avoiding the 
application of the short sale rule. Further, an NASD member is 
prohibited from knowingly, or with reason to know, effecting sales 
for the account of a customer or for its own account for the purpose 
of avoiding the rule. It is the belief of the NASD that NASD 
members' activities to circumvent the short sale rule through 
indirect actions such as executions with other members or through 
facilitation of customer orders while being protected from loss are 
antithetical to the purposes of the rule. See NASD Rules, Article 
III, Section 48.
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    Under NASD Rules, Article III, Section 48, sales of NM securities 
may be designated as bid test exempt if they qualify for one or more of 
the exemptions from the bid test included in the rule. One of these 
exemptions applies to short sales effected by ``qualified options 
market makers''\15\ (``market maker exemption'') to hedge offsetting 
options positions. This exemption recognizes the need for options 
market makers to hedge their options positions by buying or selling 
(including selling short) shares of underlying stocks or underlying 
component stocks contained in stock indexes.
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    \15\A ``qualified options market maker'' is an options market 
maker who has received an appointment as a ``qualified options 
market maker'' for certain classes of stock options on Nasdaq 
National Market securities and index options on qualified stock 
indexes pursuant to the rules of a ``qualified options exchange.'' 
See NASD Rules, Article III, Section 48(h)(2)(b). For a definition 
of a ``qualified options exchange,'' see infra note 16 and 
accompanying text.
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    To benefit from the bid test exemption afforded to qualified 
options market makers, a market maker must be designated as a qualified 
options market maker by a ``qualified options exchange.''\16\ The NASD 
Rules define a ``qualified options exchange'' as a national securities 
exchange with Commission approved rules and procedures governing the 
designation of qualified options makers. In addition, to be deemed a 
``qualified options exchange,'' the NASD Rules require an exchange to 
implement procedures governing the surveillance of its market makers' 
use of the exemption, as well as to require the exchange to authorize 
the NASD to limit the designation of a qualified options market maker 
where the options exchange finds substantial, willful, or continuing 
violations of its rule governing qualified options market makers.\17\
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    \16\See NASD Rules, Article III, Section 48(h)(2)(c).
    \17\Id.
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    The Exchanges' rules governing qualified options market makers will 
be implemented as an eighteen month pilot and will be effective 
concurrently with the NASD's bid test rule pilot program. The proposals 
are subject to modification or termination at the end of the pilot 
period. Additionally, the exchanges will require market makers to 
designate the NM securities to which the NASD market maker exemption 
will apply.
    If an Exchange determines that a qualified options market maker has 
failed to comply with the terms of the market maker exemption, that 
Exchange may withdraw, suspend, or modify the designation of a 
qualified options market maker based upon that Exchange's determination 
that such action is warranted in light of the substantial, willful, or 
continuing nature of the violation. Each Exchange also will notify the 
NASD of such a determination so that the NASD may take steps to ensure 
that Nasdaq NM sales are executed in compliance with all applicable 
NASD rules. Moreover, the Exchanges have designed surveillance 
procedures to ensure compliance with the proposed rule change. 
Specifically, these procedures must be implemented to allow the 
Exchanges to be deemed qualified options exchanges as that term is 
defined by the NASD pursuant to the options market maker exemption.\18\
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    \18\Id.
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B. The CBOE's Proposal

    The CBOE proposes to adopt Rule 15.10 to require members to 
designate sales of Nasdaq NM securities as long sales, short sales, or 
bid-test exempt sales.\19\ The CBOE proposal allows a short sale to be 
designated as bid-test exempt if the sale qualifies for one of the 
NASD's bid-test exemptions, or, as further provided in the NASD's rule, 
if the short sale is an exempt hedge transaction in a ``designated NM 
security''\20\ underlying a class of stock options, or included in an 
index underlying a class of index options for which the market maker 
holds an appointment under the CBOE's rules.\21\
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    \19\See CBOE Proposed Rule 15.10(a).
    \20\``Designated NM security'' is defined as an NM security 
which the market maker has designated as qualifying for the bid-test 
exemption. See Proposed CBOE Rule 15.10(c)(2)(B).
    \21\See CBOE Proposed Rule 15.10(c).
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    Under the CBOE's proposal, a registered market maker will be 
considered a qualified options market maker in options on properly 
designated NM securities. Such a market maker is entitled to engage in 
``exempt hedge transactions'' with respect to those NM securities.\22\ 
The CBOE's proposed rule will remain effective for the eighteen month 
pilot period of the NASD's short sale rule, or for whatever period the 
market maker short sale exemption remains effective.\23\
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    \22\The CBOE defines an ``exempt hedge transaction,'' consistent 
with the definition in the NASD's short sale rule, as a short sale 
in an NM security effected to hedge, and which in fact serves to 
hedge, an existing offsetting options position or an offsetting 
options position that was created in one or more transactions 
contemporaneous with the short sale.
    With respect to index options, the CBOE will require that the NM 
security sold short be a component security of the index underlying 
such index option, that at least 10 percent of the value of the 
index underlying such index option be represented by one or more NM 
securities, and that the current aggregate value of the NM 
securities sold short not exceed the aggregate current index value 
of the index options position being hedged. Once an underlying index 
satisfies the 10 percent test, the continued qualification of the 
index shall be reviewed as of the end of each quarter, and the index 
shall cease to qualify if the value of the index represented by one 
or more NM securities is less than 8 percent at the end of any 
subsequent year. See CBOE Proposed Rule 15.10(c)(2)(ii)(A). See also 
NASD Rules, Article III, Section 48(h)(2)(d) (defining ``qualified 
stock index'').
    A transaction unrelated to normal options market making 
activity, such as index arbitrage or risk arbitrage, that is 
independent of a market maker's market making functions, will not be 
considered an exempt hedge transaction. See CBOE Proposed 
Interpretation and Policy .01, CBOE Proposed Rule 15.10.
    \23\See CBOE Proposed Rule 15.10(d).
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    The CBOE proposal also provides that if one of its members 
initiates, accepts for execution, transmits for execution, or executes 
a short sale of an NM security without properly identifying it, such a 
sale may violate certain CBOE rules. In addition, if a participant 
designates a short sale as a bid test exempt sale, including claiming 
the sale to be exempt by reason of the market maker exemption, but does 
not satisfy the requirements for such an exemption, or if the sale is 
made with the purpose of disrupting or manipulating the market in the 
security that is the subject of the sale of a related option, such a 
sale may also violate certain CBOE rules.\24\ The CBOE has designed 
surveillance procedures to monitor member compliance with the CBOE's 
proposed rule once it becomes effective.\25\ Finally, the CBOE has 
stated its commitment to notify the NASD if the CBOE determines that 
there has been a substantial, willful, or continuing violation of its 
proposed rule.
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    \24\See CBOE Proposed Rule 15.10(f).
    \25\See CBOE Amendment No. 1, supra note 6.
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C. The Phlx's Proposal

    The Phlx proposal is substantially the same as the CBOE proposal. 
The Phlx's proposal creates new Rule 1072 entitled Reporting 
Requirements Applicable to Short Sales in NASD/NM Securities. The Phlx 
proposal applies to Registered Options Traders (``ROTs'') and 
specialists. In its original filing, Phlx ROTs and specialists were 
both limited to designating Nasdaq NM securities underlying no more 
than twenty of the options or index options, which the specialist or 
ROT has been allocated or assigned respectively, as designated Nasdaq 
NM securities. The Phlx has since amended its proposal to state that a 
Phlx specialist may designate all Nasdaq NM securities in which it is 
registered.\26\ The Phlx proposal also amends Phlx Rule 455(d)(12) 
(Short Sales) by adding a reference to its new Rule 1072.
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    \26\See Phlx Amendment No. 2.
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D. The Amex's Proposal

    The Amex proposal is substantially the same as the CBOE proposal. 
The Amex proposal adds a new paragraph (d) to its Rule 957, Accounts, 
Orders and Records of Registered Traders Specialists and Associated 
Persons. The Amex refers to options specialists and registered options 
traders, as those terms have the same basic meaning as the CBOE term 
``market maker.'' The Amex proposal also amends Amex Rule 590 (Minor 
Rule Violation Fine Systems) by adding a reference to new paragraph (d) 
of its Rule 957.\27\
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    \27\When the Amex originally submitted its rule proposal, its 
proposed amendment of Rule 590 incorrectly made reference to a Rule 
992. The Amex amended its proposal to correct this error. See Amex 
Amendment No. 1, supra note 8.
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E. The PSE's Proposal

    The PSE proposal is nearly identical to the CBOE proposal. The PSE 
proposal creates new Rule 4.19, Reporting Requirements Applicable to 
Short Sales in Nasdag/NM Securities. The PSE filed an amendment 
requesting accelerated effectiveness of its proposal.28 In 
addition, the PSE's proposal contains a non-substantive difference with 
respect to format.
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    \2\8See PSE Amendment No. 1, supra note 9.
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F. The NYSE's Proposal

    The NYSE's proposal is structured differently from those of the 
CBOE and other Exchanges, though it is not dissimilar in effect. 
Instead of referring to ``Nasdag NM securities,'' the NYSE refers to 
``Nasdag NMS securities,'' defining such securities as having the 
meaning that Part I of Schedule D to the By-Laws of the NASD assigns 
either to NM or NMS securities.29 The NYSE defines a ``qualified 
options Exchange market maker'' to mean either an NYSE options 
specialist acting in respect of one of his specialty options or an NYSE 
Competitive Options Trader (``COT'') acting in respect of an NYSE 
listed option.30
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    \2\9See Proposed NYSE Rule 759A(a)(iv).
    \3\0See NYSE Proposed Rule 759A(a)(v).
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    Unlike the CBOE proposal, the NYSE proposed rule does not state 
explicitly the prohibition against its members transacting an improper 
short sale for the account of another NYSE member. Instead, the NYSE 
states that the market maker exemption is available only if the short 
sale is related to normal market making activity.31
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    \3\1See NYSE Proposed Rule 759A(a)(i)(C)(3). A short sale 
effected for such purposes as index arbitrage or risk arbitrage that 
in either case is independent of a market maker's market making 
functions is not considered related to normal market making 
activity. Id.
    In its filing, the NYSE states that its specialists are subject 
to market making obligations with respect to all activity in their 
assigned specialty options and COTs are subject to market making 
obligations with respect to all activity in all Exchange listed 
options. Nevertheless, the NYSE proposal also includes a requirement 
that the market maker exemption only be available for transactions 
``related to market making activity'' in order to accommodate the 
possibility that the Exchange may someday limit the scope or 
parameters pursuant to which COTs must fulfill their market making 
obligations in a manner similar to that of the options market makers 
on the options exchanges that divide their floors into zones. See 
File No. SR-NYSE-94-22.
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III. Discussion

    The Commission believes that the Exchanges' proposed rule changes 
are consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to national securities exchanges. 
Specifically, the Commission believes the Exchanges' proposals are 
consistent with the requirements of Section 6(b)(5) of the Act32 
in that they are designed to promote just and equitable principles of 
trade and to protect investors and the public interest. The proposals 
coordinate the Exchanges' rules with the NASD's bid test applicable to 
short sales of NM securities. The bid test is intended to reduce the 
potential for abusive short selling practices in the Nasdaq market 
without restricting options market makers who may need to sell stocks 
short in order to hedge options positions resulting from their market 
making activities.
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    \3\215 U.S.C. 78f(b)(5) (1988).
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    The Commission approved the NASD's short sale rule proposal on June 
29, 1994,33 and in doing so stated that the rule, together with 
the market maker exemption, is a reasonable approach to short sale 
regulation of Nasdaq National Market securities. The Commission 
believes the Exchanges' proposals are consistent with the NASD's bid 
test rule. Moreover, the Commission believes the Exchanges' proposals 
address the limitations imposed by the NASD for applicability of the 
market maker exemption.
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    \3\3See Securities Exchange Act Release No. 34277, supra note 5.
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    Specifically, the Exchanges' proposals will implement rules 
designed so that each Exchange will satisfy the NASD's definition of a 
``qualified options exchange.''34 Additionally, the proposals 
include provisions to allow the Exchanges to designate options market 
makers, specialists, and their equivalents as ``qualified options 
market makers.''35 This designation will allow these market 
makers, specialists, and their equivalent to make use of the NASD's 
market maker exemption to the bid test rule.
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    \3\4See supra note 16.
    \3\5See supra note 15.
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    The first requirement imposed by the NASD for an exchange to be a 
``qualified options exchange'' is that it have approved rules and 
procedures for designating market makers as qualified options market 
makers. These standards must be designed to identify options market 
makers who regularly engage in market making activities in the 
particular options class(es). Accordingly, the CBOE proposal states 
that a CBOE market maker will be considered a ``qualified options 
market maker'' in options on properly ``designated NM 
securities.''36 CBOE market makers may designate NM securities 
underlying options, or included in an index underlying options, for 
which they hold an appointment at no more than three trading stations 
at the CBOE.37 A short sale in a designated NM security that is an 
``exempt hedge transaction,''38 is entitled to the NASD's market 
maker exemption from its bid test rule. The Phlx,39 Amex,40 
PSE,41 and NYSE42 have very similar provisions in their 
proposals. The Commission believes that these standards should help to 
ensure that qualified options market makers continue to engage in 
market making activities in their assigned options, while not allowing 
the market maker exemption to be extended beyond its original purpose.
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    \3\6See Proposed CBOE Rule 15.10(c)(2)(B), and supra note 20.
    \3\7Id. A Phlx ROT may designate NM securities underlying no 
more than 20 of the options or index options which the ROT has been 
allocated or assigned as designated NM securities; a Phlx specialist 
may designate NM securities underlying all the options or index 
options for which the specialist is registered. See Phlx Proposed 
Rule 1072(c)(2) (ii) & (iii). Designated securities of an Amex ROT 
or options specialist are NM securities underlying a class of stock 
options or included in an index underlying a class of index options 
in which the specialist is registered or the ROT is assigned. See 
Amex Proposed Rule 957(d)(2)(b)(i). A PSE market maker may designate 
NM securities underlying options or included in an index underlying 
options for which he holds an appointment on the PSE options floor. 
See PSE Proposed Rule 4.19(c)(2)(B)(ii). For NYSE specialists and 
COTS, designated securities include assigned specialty options for 
NYSE options specialists, and all securities underlying NYSE-listed 
options with respect to NYSE COTS. See File No. SR-NYSE-94-22.
    \3\8The CBOE proposal defines an ``exempt hedge transaction'' as 
a short sale in an NM security that was effected to hedge, and in 
fact serves to hedge, an existing offsetting options position or an 
offsetting options position that was created in one or more 
transactions contemporaneous with the short sale. See CBOE Proposed 
Rule 15.10(c)(2)(ii)(A), and supra note 22.
    \3\9See Phlx Proposed Rule 1072.
    \4\0See Amex Proposed Paragraph (d) to its Rule 957.
    \4\1See PSE Proposed Rule 4.19.
    \4\2See NYSE Proposed Rule 759A.
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    The second requirement for an Exchange to be deemed a ``qualified 
options exchange'' pursuant to the NASD's rules is that the exchange 
have procedures providing for the surveillance of its market makers' 
use of the market maker exemption set forth in NASD Rules, Article III, 
Section 48(h)(1). The purpose of such procedures is to ensure that 
short sales effected by qualified options market makers are exempt 
hedge transactions and that other non-qualified market makers are not 
using the exemption. The Commission is satisfied that the Exchanges 
have provided for the implementation of such procedures to become 
effective with the implementation of the NASD's bid test rule. These 
procedures are intended to monitor market maker use of the market maker 
exemption.
    Finally, each Exchange, in its respective proposal, has stated that 
if it determines that a qualified options market maker has failed to 
comply with the terms of the exemption, the Exchange may withdraw, 
suspend, or modify the designation of a qualified options market maker 
based upon the Exchange's determination of the substantial, willful, or 
continuing nature of the violation.\43\ The purpose of this provision 
is to satisfy the third NASD requirement for an exchange to be deemed a 
qualified options exchange. That requirement states that an exchange 
must have rules and procedures authorizing the NASD to withdraw, 
suspend, or modify the designation of a qualified options market maker 
if the qualified options exchange has determined that the qualified 
options market maker has failed to comply with the terms of the market 
maker exemption, and that such a withdrawal, suspension, or 
modification of the market maker's exemption is warranted in light of 
the substantial, willful, or continuing nature of the violation.\44\ 
The Commission also notes that because each Exchange proposal contains 
a commitment to notify the NASD of such a determination, the Exchanges 
have provided the NASD with the means to withdraw, suspend, or modify 
the designation of a qualified options market maker insofar as Nasdaq 
NM securities are involved.
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    \43\See Securities Exchange Act Release No. 34049, supra note 
11, and File Nos. SR-Amex-94-21, SR-NYSE-94-22, SR-PSE-94-16, and 
SR-Phlx-94-09.
    \44\Moreover, the CBOE, in its proposal, provides that it will 
not be deemed a violation of the proposed rule when a member 
designates a short sale as bid test exempt where the member does not 
know or have reason to know that the criteria for designating such a 
sale as bid test exempt are not satisfied. See CBOE Proposed Rule 
15.10(e). With the exception of the NYSE, the other exchanges have 
very similar provisions. See Phlx Proposed Rule 1072(e); Amex 
Proposed Rule 957(d)(4); and PSE Proposed Rule 4.19(e).
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    The Commission approved the NASD's short sale rule on an eighteen 
month temporary basis, effective September 6, 1994, through March 5, 
1996.\45\ In doing so, the Commission stated that questions remain 
whether the market maker exemption from the short sale rule is 
appropriate on an ongoing basis. The Commission noted that specialists 
and other market makers do not enjoy similar exemptions from the 
Commission's short sale rule for listed securities under Rule 10a-1 
under the Exchange Act. Consequently, the Exchanges' proposals are 
approved on a temporary basis, to remain in effect so long as there 
exists a market maker exemption to the NASD's short sale rule.\46\
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    \45\See Securities Exchange Act Release No. 34277, supra note 5.
    \46\If the NASD later amends its short sale rule in a manner 
that affects the market maker exemption, including its definition, 
conditions, and requirements, the Exchanges might be required to 
amend their respective companion market maker exemption rules so 
that the Exchanges' members may avail themselves of any continued 
market maker exemption.
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    During the eighteen-month temporary approval period for the NASD's 
bid test rule, the Commission expects the Exchanges to gather data on 
the operation and effectiveness of the rules and procedures relating to 
the market maker exemption. In particular, the Exchanges should focus 
on: gathering data regarding the number of market makers using the 
market maker exemption, and the frequency with which they use it; the 
sufficiency of the surveillance procedures; difficulties in 
administering the market maker exemption and the accompanying 
surveillance procedures; and the nature of any violations of the market 
maker exemption.
    The Commission finds good cause for approving File Nos. SR-Phlx-94-
09, and Amendment Nos. 1 and 2 thereto; SR-Amex-94-21, and Amendment 
No. 1, thereto; SR-PSE-94-16, and Amendment No. 1 thereto; and SR-NYSE-
94-22 prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register. Each of the 
Exchanges' proposed rule changes and amendments is consistent with the 
CBOE's proposal, notice of which was published on May 18, 1994,\47\ and 
contain only minor variations from the CBOE proposal. As a result, the 
Commission believes that good cause exists for approving the foregoing 
rule proposals and amendments on an accelerated basis given that the 
implementation date of the NASD bid test rule is September 6, 1994.
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    \47\See Securities Exchange Act Release No. 34049, supra note 
11.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning File Nos. SR-Phlx-94-09, and Amendment Nos. 1 and 
2 thereto; SR-Amex-94-21, and Amendment No. 1, thereto; SR-PSE-94-16, 
and Amendment No. 1 thereto; and SR-NYSE-94-22. 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 submissions, 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 Section, 450 Fifth Street, 
N.W., Washington, D.C. 20549. Copies of such filings will also be 
available for inspection and copying at the principal office of the 
above-mentioned self-regulatory organizations. All submissions should 
refer to the file number(s) in the caption above and should be 
submitted by October 4, 1994.

V. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\48\ that the proposed rule changes (File Nos. SR-Amex-94-21, SR-
CBOE-94-10, SR-NYSE-94-22, SR-PSE-94-16, SR-Phlx-94-09), as amended, 
are hereby approved on a temporary basis, to remain in effect so long 
as the current market maker exemption to the NASD's short sale rule 
remains in effect.
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    \48\15 U.S.C. 78s(b)(2) (1988).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\49\
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    \49\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-22575 Filed 9-12-94; 8:45 am]
BILLING CODE 8010-01-M