[Federal Register Volume 59, Number 248 (Wednesday, December 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31657]


[Federal Register: December 28, 1994]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 240, and 249

[Release No. 34-35123; File No. S7-17-94]
RIN: 3235-AG15


Proposed Rule Changes of Self Regulatory Organizations; Annual 
Filing of Amendments to Registration Statements of National Securities 
Exchanges, Securities Associations, and Reports of the Municipal 
Securities Rulemaking Board

AGENCY: Securities and Exchange Commission.

ACTION: Final rules.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
adopting amendments to Rule 19b-4 and Form 19b-4 under the Securities 
Exchange Act of 1934 to expand the scope of proposed rule changes filed 
by self-regulatory organizations that may become effective immediately. 
The Commission also is amending its rules to delegate to the Director 
of the Division of Market Regulation certain related functions. The 
amendments implement recommendations contained in the Market 2000 
report and are designed to expedite and streamline the process by which 
proposed rule changes of self-regulatory organizations are filed and 
become effective. In addition, the Commission is streamlining and 
conforming the requirements for national securities exchanges and 
securities associations to file annual amendments to their registration 
statements, and for the Municipal Securities Rulemaking Board to file 
annual reports.

EFFECTIVE DATE: January 27, 1995.

FOR FURTHER INFORMATION CONTACT: (prior to the effective date) 
Catherine McGuire, Chief Counsel, or Andrew S. Margolin, Senior 
Counsel, Office of Chief Counsel, at (202) 942-0073; (after the 
effective date) for exchange rules, Sharon Lawson, Assistant Director, 
at (202) 942-0182, or Ivette Lopez, Senior Special Counsel, at (202) 
942-0765; for National Association of Securities Dealers and Municipal 
Securities Rulemaking Board rules, Katherine A. England, Assistant 
Director, at (202) 942-0154; for clearing agency rules, Jerry 
Carpenter, Assistant Director, at (202) 942-4187, Office of Market 
Supervision, Division of Market Regulation, Securities and Exchange 
Commission, 450 Fifth Street, NW., Mail Stop 5-1, Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

I. Introduction

    On June 1, 1994, the Commission proposed for public comment 
amendments to Rule 19b-41 and Form 19b-42 under the 
Securities Exchange Act of 19343 (``Exchange Act'' or ``Act''), 
the rule and form applicable to the process by which self-regulatory 
organizations (``SROs'') file proposed rule changes with the 
Commission.4 The proposal was intended to expedite the rule filing 
process by expanding the categories of proposed rule changes that may 
become effective upon filing pursuant to Section 19(b)(3)(A)5 of 
the Act to include certain systems changes and other noncontroversial 
filings. The Commission also proposed amendments to Rules 6a-2,6 
15Aj-1,7 17a-21,8 and Form X-15AJ-29 under the Act, to 
streamline and conform the annual filing requirements of amendments to 
registration statements of national securities exchanges and securities 
associations, and annual reports of the Municipal Securities Rulemaking 
Board (``MSRB'').
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    \1\17 CFR 240.19b-4.
    \2\17 CFR 249.819.
    \3\15 U.S.C. 78a, et seq.
    \4\Securities Exchange Act Release No. 34140 (June 1, 1994), 59 
FR 29393 (``Proposing Release'').
    \5\15 U.S.C. 78s(b)(3)(A).
    \6\17 CFR 240.6a-2.
    \7\17 CFR 240.15Aj-1.
    \8\17 CFR 240.17a-21.
    \9\17 CFR 249.803.
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    The proposals implement recommendations contained in the Division 
of Market Regulation's (``Division'') Market 2000 report.10 The 
report recommended that the rule filing process be expedited for 
routine procedural and administrative modifications to existing order-
entry and trading systems. The Division also agreed to consider other 
types of SRO proposals that could be subject to an expedited review 
process.
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    \1\0Division of Market Regulation, Market 2000: An Examination 
of Current Equity Market Developments (January, 1994).
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    The Commission received nine comment letters in response to its 
request for comments.11 Commenters expressed general support for 
these proposals, and also suggested other ways to improve the SRO rule 
filing process. The Commission has determined to adopt the amendments 
substantially as proposed with some modifications designed to address 
the comments received.12 The Commission also is providing further 
clarification on the application of amended Rule 19b-4.
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    \1\1See Letters to Jonathan G. Katz, Secretary, Securities and 
Exchange Commission, from: James E. Buck, Senior Vice President and 
Secretary, New York Stock Exchange (``NYSE''), dated August 12, 
1994; Richard G. Ketchum, Chief Operating Officer and Executive Vice 
President, National Association of Securities Dealers (``NASD''), 
dated August 16, 1994; James F. Duffy, Executive Vice President and 
General Counsel, American Stock Exchange (``Amex''), dated August 
18, 1994; Michael L. Myers, Schiff Hardin & Waite [on behalf of the 
Chicago Board Options Exchange (``CBOE'') and the Options Clearing 
Corporation (``OCC'')], dated August 12, 1994; J. Craig Long, 
Secretary, Chicago Stock Exchange (``CHX''), dated August 8, 1994; 
Larry R. Shotwell, Executive Vice President, Pacific Stock Exchange 
(``PSE''), dated August 12, 1994; David C. Clapp, Chairman, 
Municipal Securities Rulemaking Board (``MSRB''), dated August 3, 
1994; William W. Uchimoto, First Vice President and General Counsel, 
Philadelphia Stock Exchange (``Phlx''), dated August 19, 1994; and 
John I. Fitzgerald, Executive Vice President, Boston Stock Exchange 
(``BSE''), dated August 8, 1994. The comment letters and a summary 
of comments are contained in Public File No. S7-17-94.
    \1\2These amendments may affect clearing agencies for which the 
Commission is not the appropriate regulatory agency as defined in 
Exchange Act Sec. 3(a)(34), 15 U.S.C. 78c(a)(34). Therefore, in 
accordance with Exchange Act Sec. 17A(d)(3)(A)(i), 15 U.S.C. 78q-
1(d)(3)(A)(i), at least 15 days before this announcement, the 
Commission consulted and requested the views of the Board of 
Governors of the Federal Reserve System.
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II. Amendments to Rule 19b-4

    Under Section 19(b) of the Act, an SRO is required to file with the 
Commission its proposed rule changes.13 Once a proposed rule 
change is filed, the Commission is required to publish notice of it and 
provide an opportunity for public comment. The proposed rule change may 
not take effect unless approved by the Commission or unless the rule 
change is within the class of rule changes effective upon filing 
pursuant to Section 19(b)(3)(A).14
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    \1\315 U.S.C. 78s(b)
    \1\4See Proposing Release for a more complete discussion of this 
process.
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    Under Section 19(b)(3)(A) of the Act and Rule 19b-4(e) thereunder, 
a proposed rule change may take effect upon filing without the notice 
and approval procedures required by Section 19(b)(2) if the proposed 
rule change comes within prescribed statutory categories,15 
including matters which the Commission may, consistent with the public 
interest and the purposes of this subsection, specify by rule. 
Accordingly, the Commission is amending Rule 19b-4 to add two new 
categories of proposed rule changes that can become effective in this 
manner: (1) Routine procedural and administrative modifications to 
existing order-entry and trading systems (the ``existing systems 
category''); and (2) certain other noncontroversial filings (the 
``noncontroversial category'').16 The Commission believes that 
these amendments are consistent with the general principles of the 
Exchange Act applicable to the approval of SRO rule changes that ensure 
that meaningful public comment is reflected where necessary. All rule 
changes that become effective under Section 19(b)(3)(A) will continue 
to be subject to abrogation by the Commission within 60 days of the 
filing.17
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    \1\5These include rule changes that (1) Constitute a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the SRO, (2) 
establish or change a due, fee, or other charge imposed by the SRO, 
or (3) that are concerned solely with the administration of the SRO. 
15 U.S.C. 78s(b)(3)(A).
    \1\6These categories will be established by amending Rule 19b-4 
to add paragraph (e)(5) for the systems category and paragraph 
(e)(6) for the noncontroversial category, and by making conforming 
changes to Form 19b-4.
    \1\715 U.S.C. 78s(b)(3)(C).
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A. Systems Changes

    In the Proposing Release, the Commission proposed to allow SRO rule 
changes dealing with routine procedural and administrative 
modifications to existing order-entry and trading systems to become 
effective upon filing pursuant to Section 19(b)(3)(A) of the Act. 
Historically, it has been required that these modifications be filed 
under Section 19(b)(2).18 The proposed amendments limit the scope 
of the existing systems category to those systems changes that: (1) Do 
not significantly affect the protection of investors or the public 
interest; (2) do not impose any significant burden on competition; and 
(3) do not have the effect of limiting the access to or availability of 
the system.
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    \1\8See, e.g., Letter from Richard T. Chase, Assistant Director, 
SEC, to Frank Wilson, Executive Vice President, NASD (February 4, 
1983).
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    Commenters supported this proposal because it would address 
concerns that the filing process with respect to these types of rule 
changes can be too lengthy, and hampers the ability of SROs to provide 
prompt, flexible, and innovative systems changes. Several commenters, 
however, requested further clarification of when a systems change 
requires a filing, and whether such filings would be eligible to become 
effective upon filing under the existing systems category.
1. Systems Changes that Require Rule Change Filings
    The NASD commented that certain changes related to order-entry and 
trading systems should not be considered proposed rule changes at all 
and should be exempt from the filing process. The NASD cited changes 
involving the format and appearance of screens, keystroke commands, 
underlying hardware and software changes, and the user manuals and 
technical guides to system operation. The NASD stated that these 
filings rarely would pose significant concerns in the areas of investor 
protection, public interest, or fair competition.
    While changes to the format and appearance of screens, or changes 
involving the underlying hardware and software may not need to be filed 
pursuant to Section 19(b)(2) in many instances, the Commission cannot 
state as a general matter that these changes are never required to be 
filed. For example, if an SRO decided to alter the format and 
appearance of a system providing quotation information by excluding the 
market maker or market specialist identifier, thus making it virtually 
impossible for a system user to determine the origination of a quote, 
the SRO would then be required to file a proposed rule change with the 
Commission. The Exchange Act requires SROs to have rules designed, 
among other things, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system.19 Thus, 
any change to a system providing quotation information that would 
affect the maintenance of a free and open market or a national market 
system would be required to be filed with the Commission.
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    \1\915 U.S.C. 78f(b)(5) and 78o-3(b)(6).
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    Similarly, changes to keystroke commands would generally not 
require a filing. If such a change, however, would have the effect of 
prohibiting entry of certain types of orders, such as a series of 
keystrokes so cumbersome that it has the effect of prohibiting the 
entry of orders priced outside the current inside market, that change 
would require a filing pursuant to Section 19(b)(2).20 While 
software or hardware changes generally do not require a filing pursuant 
to Section 19(b)(2), the Commission has suggested that significant 
hardware and software changes be reported to the Commission on an 
annual and an as-needed basis, as stated in its most recent Automation 
Review Policy.21
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    \2\0In fact, the Commission recently was presented with a 
situation which raised this very issue and demonstrated the need for 
filing pursuant to Section 19(b)(2). On October 25, 1993, the NASD 
filed with the Commission a proposed rule change to modify the 
SelectNet service by prohibiting entry of orders in SelectNet priced 
outside the inside Nasdaq market. Securities Exchange Act Release 
No. 33101 (Oct. 25, 1993), 58 FR 58363 (File No. SR-NASD-93-60). The 
NASD filed that rule change pursuant to Section 19(b)(3)(A) of the 
Act which became effective immediately. On October 29, 1993, 
pursuant to Section 19(b)(3)(C) of the Act, the Commission abrogated 
the rule change on the basis that it should have been filed pursuant 
to Section 19(b)(2) and thus, subject to notice and comment. 
Securities Exchange Act Release No. 33116 (Oct. 29, 1993), 58 FR 
58883. On November 1, 1993, the NASD refiled with the Commission the 
proposed rule change pursuant to Section 19(b)(2) of the Act. 
Securities Exchange Act Release No. 33141 (Nov. 3, 1993), 58 FR 
59504 (File No. SR-NASD-93-61). Due to concerns about whether the 
NASD's proposal was consistent with the Act, the Commission 
instituted proceedings pursuant to Section 19(b)(2)(B) of the Act to 
determine whether the proposed rule change should be disapproved. 
Securities Exchange Act Release No. 34000 (May 3, 1994), 59 FR 
23909. Subsequently, the NASD modified the SelectNet keystroke 
procedures for entering and accepting orders outside the inside 
Nasdaq market. The modification provided a warning to SelectNet 
participants that the order is priced outside the inside market but 
allows participants to override the warning. Because this 
modification neither significantly altered SelectNet nor denied 
access to SelectNet, the change was not considered a proposed rule 
change and thus did not require filing with the Commission. As a 
result, the NASD withdrew its proposed rule change and the 
Commission terminated the proceedings to determine whether to 
disapprove the proposal. Securities Exchange Act Release No. 34486 
(Aug. 4, 1994), 59 FR 40933.
    \2\1Securities Exchange Act Release No. 29185 (May 9, 1991), 56 
FR 22490.
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    User manuals and technical guides for a particular system, as a 
general matter, need not be filed with the Commission. It has been the 
Commission's experience, however, that at times, a clear understanding 
of how the system functions may be achieved only by reviewing the rules 
of the SRO in conjunction with the user manual or technical guide. The 
Commission believes that it is more appropriate to have the relevant 
information in the SRO's rules so that it may be available to anyone 
seeking an understanding of the system's operation.22 It is the 
SRO's responsibility to make the initial determination of whether an 
action an SRO is contemplating will require a filing, including whether 
to file user manuals and technical guides. Whether any particular guide 
needs to be filed must be determined on a case by case basis.23
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    \2\2The SRO's rules should indicate, for example, the types and 
size of orders, and with specificity, the manner in which orders 
will be processed in the system. Specifically, with respect to a 
system such as SelectNet, it is important to know how the different 
types of orders are displayed and to whom they are displayed. See 
Letter from David Humphreville and Caroline B. Austin, Co-Chairs, 
National Specialist Association to Jonathan G. Katz, Secretary, SEC, 
dated November 6, 1992 (commenting on File No. SR-NASD-92-16). 
Information explaining the combination of keystrokes that must be 
used to accept an order may be more appropriate for a user manual or 
technical guide.
    \2\3If an SRO has failed to explain clearly in its rules how a 
particular system functions, including who has access to the system, 
it should consider submitting a proposed rule change comprising the 
relevant information contained in the guide or manual.
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2. Scope of Filings Eligible for the Existing Systems Category
    In the Proposing Release, the Commission cited examples of the type 
of proposed rule change that would be within the existing systems 
category. For example, a proposed rule change that would increase 
marginally the maximum number of shares per order that could be 
executed through an SRO's small order routing and execution system, or 
a proposed rule change that would expand the number of series or 
classes eligible for options routing and execution systems generally 
could be filed pursuant to Section 19(b)(3)(A).
    In addition, the Commission believes that the following recent 
filings also exemplify the type that would qualify for the existing 
systems category: a rule change requiring the use of a special 
indicator for average-priced trade reports,24 and one requiring 
OTC Bulletin Board (``OTCBB'') market makers to append a fifth 
character to their market maker identifier as a geographic indicator 
when trading away from primary offices.25
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    \2\4File No. SR-NASD-93-20.
    \2\5File No. SR-NASD-93-74.
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    The NASD suggested that the term ``trading system'' should be 
clarified to include automated services that support trading, trade 
reporting, and clearance and settlement, such as the OTCBB and the 
Automated Confirmation Transaction service (``ACT''). The NASD 
recommended that changes to these systems should be eligible under 
either the existing systems category, or the noncontroversial category 
discussed below.
    The Amex requested that the Commission make clear that changes to 
automatic equity order execution systems that could interfere with 
providing best execution would be precluded from filing under Section 
19(b)(3)(A). The Amex also requested that the Commission not limit the 
availability of the existing systems category to only marginal 
increases in the number of shares per order that can be entered and 
executed through a small order routing and execution system, as stated 
in the Proposing Release, but also include significant increases in 
certain circumstances.
    While the Commission generally believes that it may be reasonable 
to interpret broadly the term ``trading system,'' to include related 
automated services such as the OTCBB or ACT, such that changes to those 
services could be eligible for filing under the existing systems 
category, the Commission also believes, for example, that a proposal to 
expand the category of eligible securities in connection with a system 
to include foreign securities would raise investor protection and 
competitive concerns, and would thus be subject to review pursuant to 
Section 19(b)(2).
    The Commission recognizes, as noted by the Amex, that a proposed 
rule change that interferes with best execution obligations would 
significantly affect the protection of investors and thus would not 
satisfy the conditions for expedited treatment set forth in the rule. 
The Commission also believes that a proposed rule change that 
substantially increases the number of shares per order routed or 
executed through a small order execution system may in some 
circumstances be eligible for expedited treatment. Such a proposed rule 
change, however, generally would not be eligible to become effective 
upon filing under the existing systems category because a change in the 
order size of substantial magnitude would not qualify as a modification 
of an existing system, but in effect establishes a new system. Thus, it 
generally will be more appropriate to file significant increases in 
order size under the noncontroversial category discussed below.
    The Commission is adopting the amendments concerning existing 
systems changes as originally proposed. The Commission believes that, 
because these types of proposed rule changes deal with operational 
details of existing systems and are subject to certain limitations in 
the rule, they do not require the full notice and review procedures of 
Section 19(b)(2). The amendments bring the filing procedures for this 
type of proposed rule change in line with procedures that have been in 
effect for clearing agencies since 1980.26
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    \2\6A proposed rule change of a registered clearing agency can 
become effective upon filing pursuant to Rule 19b-4 if it effects a 
change in an existing service that (1) does not adversely affect the 
safeguarding of securities or funds in the custody or control of the 
clearing agency or for which it is responsible and (2) does not 
significantly affect the respective rights or obligations of the 
clearing agency or persons using the service. See Securities 
Exchange Act Release No. 17258 (October 30, 1980), 45 FR 73906.
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B. Noncontroversial Filings

    As proposed, the amendments to Rule 19b-4 also would expand the 
scope of proposed rule changes that may become effective upon filing 
under Section 19(b)(3)(A) to include certain noncontroversial filings. 
For these filings, SROs would be required to provide written notice to 
the Commission five business days prior to the filing.27 This 
notice would provide Commission staff an opportunity to discuss with 
the SRO whether there exists an adequate basis upon which the proposed 
rule change may properly qualify under Section 19(b)(3)(A), and could 
elicit guidance from Commission staff to help the SRO identify those 
aspects of a proposed rule change that the Commission deems 
important.28 Proposed rule changes in the noncontroversial 
category, by their terms, would become operative 30 days after the date 
of publication of the notice, or such shorter time as the Commission 
may designate.
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    \2\7As stated in the Proposing Release, the Commission expects 
that such notices will be informal and often transmitted by 
facsimile. The notice should be directed to the appropriate Division 
staff responsible for reviewing that SRO's filings of proposed rule 
changes. The Commission intends to place this notice in a public 
file. See Exchange Act Sec. 23(a)(3), 15 U.S.C. 78w(a)(3).
    For every clearing agency for which the Commission is not the 
appropriate regulatory agency, the notice also must be filed with 
the appropriate regulatory agency for the clearing agency as 
required by Exchange Act Sec. 17(c)(1), 15 U.S.C. 78q(c)(1). 
Consistent with the requirements of that section, the Commission 
also would expect the MSRB to file such notices with each agency 
enumerated in Exchange Act Sec. 3(a)(34)(A), 15 U.S.C. 
78c(a)(34)(A).
    \2\8This also should help the SRO articulate in its subsequent 
filing the purpose and effects of the proposed rule change, which in 
turn should further facilitate and expedite the filing process.
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    The proposal of the noncontroversial category elicited significant 
comment. The comments focused on the timing of the effectiveness of 
these noncontroversial filings, and the scope of proposed rule changes 
that may be filed under this category. Commenters also voiced concerns 
relating to the publication of notices of proposed rule changes 
generally.
1. Timing of Effectiveness
    Commenters indicated that the 30-day delayed operational date was 
too lengthy for noncontroversial rule filings and that, in any case, 
the operational date was not predictable.29 Commenters offered a 
variety of suggestions about how to address this issue. While some 
suggested that the period be shortened,30 others suggested 
eliminating the period altogether or granting authority to delay the 
operation of the rule only in specific circumstances.31 Several 
recommended that the 30-day period run from the date of the filing 
rather than the date of publication.32 The Amex requested that the 
Commission clarify procedures applicable to the filing of amendments to 
proposed rule changes under the noncontroversial category, and 
requested that there be an explicit mechanism for requesting that the 
30-day period be shortened. The Amex also recommended that the five-day 
period for submitting a pre-filing notice be a maximum, and not a 
minimum period, so as not to preclude submission of the subsequent 
filing less than five days later, in the event that the Commission 
determines in a shorter time that the filing is appropriately filed 
under this category.
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    \2\9See, e.g., Letter from NYSE.
    \3\0See, e.g., Letter from Amex.
    \3\1Letter from NYSE.
    \3\2Letters from CBOE, CHX, Phlx.
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    Related to the timing of effectiveness is the matter of publishing 
notices of proposed rule changes. Several commenters were critical of 
the length of time between the filing of a proposed rule change and its 
publication in the Federal Register. The CBOE, for example, argued that 
in some cases the publication of the notice has been inordinately 
delayed. The Phlx stated that the delay results from a lengthy pre-
publication review by the Commission. The NYSE and the NASD suggested 
that the Commission adopt an internal guideline on publishing notices 
to address this perceived problem.
    The Commission believes that a 30-day delayed operational date for 
noncontroversial filings is necessary and appropriate. If, as a result 
of either subsequent Commission review or public comment, it is 
determined that a proposed rule change was not properly filed as within 
the noncontroversial category, the 30-day period would allow the 
Commission to abrogate the rule change without a significant disruption 
in existing operations.
    To address concerns of commenters, however, the Commission has 
determined to commence the 30-day period with the filing date of the 
proposed rule change, instead of the publication date as originally 
proposed. This will enable SROs to implement a proposed rule change 
more quickly, while preserving the opportunity for meaningful public 
comment. A 30-day period triggered by the filing date provides 
predictability while assuring that the filing is reviewed not only by 
the staff but also by commenters.
    With respect to amendments to filings in the noncontroversial 
category, the Commission believes that any substantive amendment would 
trigger a new 30-day period, assuming that the changes do not render 
the filing ineligible for this category. The staff would, however, have 
discretion to accept editorial changes without triggering a new 30-day 
period. The Commission notes that this procedure was designed to 
expedite those SRO filings that are inherently simple and concise, and 
that would otherwise require little in the way of extended review or 
analysis by the Commission. A filing requiring further substantive 
amendments may indicate that it is not appropriate for the expedited 
treatment afforded by the noncontroversial category.
    Form 19b-4 also has been amended to state that an SRO requesting 
the Commission to shorten the 30-day period should provide a statement 
explaining why the Commission should do so. With respect to the five-
day pre-filing period, the Commission is amending the rule to permit 
the Commission to designate a shorter period if appropriate.
    As the Commission has stated in the past, its intent is to publish 
all notices of proposed rule changes promptly.33 In light of 
comments received, the Commission will redouble its efforts to do so in 
the future. The Commission notes, however, that notices of proposed 
rule changes need to be clear in order to elicit meaningful public 
comment. Although a proposed rule change may be accepted as filed, the 
Commission believes that it should not be published until it has 
reached an adequate level of clarity regarding the issues raised by the 
filing. For complex filings, this can require more extensive review. 
Filings of rule changes also need to include information necessary to 
enable the Commission's staff to conduct a complete review. Any filings 
that fail to comply with the requirements of Form 19b-4 may be returned 
to the SRO and will be deemed not to have been filed with the 
Commission.
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    \3\3Securities Exchange Act Release No. 17258 (October 30, 
1980), 45 FR 73906.
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2. Scope of Filings Eligible for the Noncontroversial Category
    Many commenters requested further clarification of the scope of 
this proposal. While it would be impossible to identify with certainty 
in advance every type of proposed rule change that may qualify for the 
noncontroversial category, the discussion below should assist SROs in 
assessing its availability.
    The noncontroversial category applies only to those proposed rule 
changes that are properly designated by the SRO as not significantly 
affecting the protection of investors or the public interest and not 
imposing any significant burden on competition. As indicated in the 
Proposing Release, proposed rule changes meeting these criteria 
generally are less likely to engender adverse comments or require the 
degree of review attendant with more controversial filings.
    In the Proposing Release, the Commission cited examples of proposed 
rule changes that would be eligible for the noncontroversial category, 
such as certain proposed rule changes that would add an existing rule 
to an SRO's minor rule violation plan, and proposed rule changes that 
permit the transmission of data to or from the SRO by computer 
interface or other electronic means. The Proposing Release also made 
clear, however, that for policy reasons, a proposed rule change that 
would reduce public representation in the administration of the affairs 
of an SRO or that would amend the procedures for arbitration or 
disciplinary proceedings would not be a proper candidate to become 
effective under Section 19(b)(3)(A).
    In its comment letter, the NYSE stated that the scope of the 
proposal for noncontroversial filings would depend on the 
interpretation of the term ``significant'' as it is used in the 
amendments. In requesting that the Commission provide further guidance 
on the scope of this proposal, the NYSE indicated that, based on a 
survey of its filings for 1993 and the first half of 1994, its staff 
believed that the overwhelming majority of its rule changes would not 
have been eligible for expedited treatment. The NASD and the Amex 
suggested that the Commission apply an expedited approach to proposed 
rule changes that ``clone'' or are virtually identical to other rule 
changes filed by another SRO that already have been approved by the 
Commission. The NASD also questioned the general utility of the 
noncontroversial category to the extent that a competitor could 
unjustifiably impede the expedited treatment of an SRO's proposed rule 
change simply by filing a perfunctory adverse comment letter.
    The Commission would like to make clear that although it intends to 
expedite the rule filing process, it is doing so only with respect to 
the universe of proposed rule changes that are not likely to engender 
adverse comments or otherwise warrant the type of review required by 
Section 19(b)(2) of the Act. With respect to the NYSE's survey of its 
filings, the Commission staff has determined that, of 72 NYSE proposed 
rule changes identified as being filed during the period surveyed by 
the NYSE, at least seventeen, in retrospect, would have qualified for 
expedited treatment under the noncontroversial category. These include 
filings that: (1) conformed the NYSE pre-opening application to the 
Intermarket Trading System by clarifying the use of a cancellation 
notification sent after a pre-opening notification;34 (2) similar 
to other proposals approved for the Amex and CBOE, provided for the 
listing and trading of quarterly index expiration options;35 (3) 
amended floor conduct and safety guidelines not dealing with procedural 
rights of offender (two filings);36 (4) rescinded two NYSE rules, 
Rules 391 and 392, which served little purpose in light of the 
Commission's rescission of its Rule 10b-2;37 (5) extended until 
January 31, 1994, off-hours trading and the matched market-on-close 
pilot program;38 (6) added to the exchange's minor rule violation 
plan NYSE Rule 410B, which requires members and member organizations to 
report trades in exchange listed stocks not otherwise reported to the 
Consolidated Tape;39 (7) related to registration and 
fingerprinting of floor members and employees;40 (8) amended the 
exchange's minor rule violation plan to include exchange procedures 
with respect to entry and cancellation of market-at-the-close orders on 
expiration days, and other rules for which determinations of violations 
can be made objectively (two filings);41 (9) extended for one year 
the NYSE's pilot program for position limit exemptions for certain 
hedged equity and stock index option positions;42 (10) increased 
insubstantially the exchange's continuing listing fees;43 (11) 
extended Rule 103A relating to specialist stock reallocation;44 
(12) amended NYSE Rule 321 by clarifying the term ``control'' and 
substituting the word ``subsidiary'' for the word ``affiliate'' in 
Rules 113 and 122;45 (13) authorized the NYSE to provide to the 
Central Registration Depository information concerning pending formal 
disciplinary proceedings;46 (14) for audit trail reporting 
purposes, added identification codes for short sales exempt from 
Commission or exchange rules;47 and (15) extended the exchange's 
circuit breaker pilot program.48
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    \3\4File No. SR-NYSE-93-01.
    \3\5File No. SR-NYSE-93-04.
    \3\6File Nos. SR-NYSE-93-14 and SR-NYSE-93-25.
    \3\7File No. SR-NYSE-93-20.
    \3\8File No. SR-NYSE-93-23.
    \3\9File No. SR-NYSE-93-24.
    \4\0File No. SR-NYSE-93-28.
    \4\1File Nos. SR-NYSE-93-35 and SR-NYSE-93-38.
    \4\2File No. SR-NYSE-93-42.
    \4\3File No. SR-NYSE-93-46. See discussion on fee-related 
filings in this section, infra.
    \4\4File No. SR-NYSE-94-07.
    \4\5File No. SR-NYSE-94-09.
    \4\6File No. SR-NYSE-94-11.
    \4\7File No. SR-NYSE-94-16.
    \4\8File No. SR-NYSE-94-34.
---------------------------------------------------------------------------

    In addition, the staff of the Commission has identified other 
filings that are representative of the types of filings that could 
qualify for the noncontroversial category. These include filings that: 
(1) deleted that part of Schedule D to NASD by-laws concerning 
publication and dissemination of quotations to the news media, to 
reflect current NASD practice;49 (2) deleted the section of NASD 
by-laws regarding a local quotations program that had been phased 
out;50 (3) required members to adjust certain orders when 
securities are quoted ex-dividend, ex-rights, and ex-interest;51 
(4) eliminated existing regulatory requirements for non-Nasdaq OTC 
securities once real-time reporting of those securities had been 
approved by the Commission;52 (5) extended previously approved 
pilot linkages between Nasdaq and foreign exchanges;53 (6) 
mandated market maker use of registered clearing agencies;54 and 
(7) provided a procedure for the immediate publication of final 
disciplinary sanctions.55 Moreover, it is the Commission's view 
that mechanical or simple editorial changes to existing rules, such as 
when a change in an SRO's rule numbering system results in incorrect 
cross-references in other rules, may be filed within the 
noncontroversial category.
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    \4\9File No. SR-NASD-93-14.
    \5\0File No. SR-NASD-93-40.
    \5\1File No. SR-NASD-93-52.
    \5\2File No. SR-NASD-93-68.
    \5\3File Nos. SR-NASD-94-23, SR-NASD-94-25, and SR-NASD-94-30.
    \5\4File No. SR-NASD-94-28.
    \5\5File No. SR-NASD-94-59.
---------------------------------------------------------------------------

    As noted above, under Section 19(b)(3)(A)(ii) of the Act, rule 
changes that establish or change a due, fee, or other charge imposed by 
the SRO may become effective upon filing.56 The Commission notes 
that the filing of a proposed fee applicable to members may nonetheless 
raise significant regulatory issues and thus be required, consistent 
with current Commission policy, to be submitted pursuant to Section 
19(b)(2).57 In addition, the Commission continues to believe that, 
as a matter of general policy, an SRO proposed rule change that 
establishes or changes a due, fee or other charge applicable to a non-
member or non-participant must be filed under Section 19(b)(2) for full 
notice and comment.58 While filings concerning fees applicable to 
non-members have not been eligible to become effective upon filing 
under Section 19(b)(3)(A)(ii), some such filings now may qualify for 
expedited treatment under the noncontroversial category.59
---------------------------------------------------------------------------

    \5\6See note 15, supra.
    \5\7See, e.g., Securities Exchange Act Release No. 32377 (May 
27, 1993), 58 FR 31568 (File No. SR-NYSE-93-08) (approving NYSE 
proposal to grant an additional system credit to member and member 
organizations for all individual and agency orders of a certain 
size, except orders for the account of a non-member competing market 
maker, routed through the NYSE's SuperDot system for execution); 
Securities Exchange Act Release No. 27286 (September 21, 1989), 54 
FR 40224 (File No. SR-NASD-88-55) (approving NASD proposal relating 
to the imposition on certain member firms of an assessment on annual 
gross income from transactions in U.S. Government Securities).
    \5\8Securities Exchange Act Release No. 17258 (October 30, 
1980), 45 FR 73906, at 73910 n.40. See, e.g., Securities Exchange 
Act Release Nos. 33123 (October 29, 1993), 58 FR 59083 (File No. SR-
NASD-93-49) (approving NASD proposal to extend Bond Quotation Data 
Service fees to non-member subscribers); 34272 (June 28, 1994), 59 
FR 34701 (File No. SR-Amex-94-12) (approving Amex proposal to reduce 
maximum fees for original stock listings by domestic and foreign 
issuers).
    \5\9For example, if an SRO proposes a reasonable and relatively 
minor increase in an existing fee, or a proposal that is virtually 
identical to fees of other SROs, provided that the proposal does not 
raise other regulatory issues, such proposal would qualify under the 
noncontroversial category.
---------------------------------------------------------------------------

    Furthermore, the Commission will retain a flexible approach in 
applying amended Rule 19b-4. For example, absent unusual circumstances, 
filings that are virtually identical to an SRO filing already approved 
by the Commission will be eligible for expedited treatment under the 
noncontroversial category. While the Commission generally requires that 
proposals for exchange listing of new hybrid securities be submitted to 
the Commission for full review pursuant to Section 19(b)(2) of the Act 
to ensure that all significant regulatory concerns have been addressed, 
the Commission also believes that new proposals relating to these 
products that only change certain characteristics of the products could 
be eligible for expedited treatment under the noncontroversial 
category. Once the staff has completed the review process for a 
particular new product, the need for a full review of subsequent 
similar proposals is significantly reduced. For example, the Commission 
has required exchanges to submit for full review under Section 19(b)(2) 
proposals to list and trade MITTS and SUNS, which are products linked 
to various baskets of securities.60 Because the review of new 
proposals that seek to change, for example, only the composition of the 
underlying baskets generally will be limited to the composition of 
those baskets, and because the Commission is now familiar with the 
basic structure for MITTS and SUNS, subsequent proposals should be 
eligible for the noncontroversial category.61 This will expedite 
the approval of the listing of these products.
---------------------------------------------------------------------------

    \6\0See Securities Exchange Act Release No. 32840 (September 2, 
1993), 58 FR 47485 (order approving Global Telecommunications MITTS 
portfolio).
    \6\1See, e.g., Securities Exchange Act Release No. 34655 
(September 12, 1994), 59 FR 47966 (order approving the listing of 
REIT Portfolio MITTS); Securities Exchange Act Release No. 33495 
(January 19, 1994), 59 FR 03883 (order approving the listing of 
Telecommunications Basket SUNS).
---------------------------------------------------------------------------

    The Commission notes, however, that an expedited approach would not 
necessarily apply, as the Amex suggested, to a proposal to trade index 
warrants on a stock index previously approved by the Commission for 
options trading. While use of the procedure could be considered on a 
case by case basis, as a general rule different types of derivative 
products, albeit based on the same underlying index, may not be 
sufficiently identical to be eligible for this treatment.
    With respect to the concern that a competitor may cause a proposed 
rule change of an SRO to be deemed improperly filed under the 
noncontroversial category merely by submitting a comment letter 
critical of the filing, the Commission expects that a comment letter 
would have to raise issues that legitimately suggest that the proposed 
rule change is inconsistent with the requirements of the Exchange Act 
or regulations thereunder applicable to that SRO in order for the rule 
change to be abrogated and refiled under Section 19(b)(2).
    The CBOE commented that it is unclear whether the notice published 
by the Commission indicating that a rule change has become effective 
upon filing would be sufficient to prevent a collateral attack based on 
the assertion that the rule change was improperly filed under the Act. 
The Commission concurs with the CBOE's interpretation that a rule 
change filed under Rule 19b-4(e) is deemed to have been properly filed 
thereunder if the Commission fails to abrogate it within the 60 day 
period for such action.
    Finally, the CHX urged the Commission to interpret all corporate 
governance changes that do not decrease the number of public governors 
as being within the provision of Section 19(b)(3)(A) that permits a 
proposed rule change to take effect upon filing if it is ``concerned 
solely with the administration of the SRO.'' The governance structure 
of the SROs is the subject of specific statutory standards. Because a 
change in the overall makeup of the governance structure of an SRO 
could be effected without necessarily decreasing the number of public 
governors, the Commission does not concur in this interpretation.
    In sum, the Commission is adopting amendments to Rule 19b-4 for the 
noncontroversial category with the following modifications: (1) the 30-
day period after which a noncontroversial filing may become effective 
will begin with the filing date; (2) Form 19b-4 will state that an SRO 
requesting the Commission to shorten the 30-day period should provide a 
statement explaining its reasons for so requesting; and (3) Rule 19b-4 
will permit the Commission to shorten the 5-day period in which SROs 
are required to file a notice of their intent to file, if 
appropriate.62
---------------------------------------------------------------------------

    \6\2The Commission is delegating to the Director of the Division 
of Market Regulation the functions of shortening the 30 and five-day 
periods. See Section II.C. below.
---------------------------------------------------------------------------

C. Delegation of Authority to the Director of the Division of Market 
Regulation

    The Commission currently has the authority under Section 
19(b)(3)(C) of the Exchange Act to abrogate summarily within 60 days of 
filing any proposed rule change that becomes effective under Section 
19(b)(3)(A) 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 Exchange 
Act.63 The Proposing Release indicated that if the proposals to 
expand the scope of Section 19(b)(3)(A) are adopted, the Commission 
will revise its rules to delegate this abrogation authority to the 
Director of the Division of Market Regulation.
---------------------------------------------------------------------------

    \6\315 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

    As indicated in the Proposing Release, this would be necessary to 
facilitate an expected increase in the volume of proposed rule changes 
that would be filed under Section 19(b)(3)(A). In particular, the 
Commission expects that the staff will abrogate filings if it becomes 
aware of issues that would warrant further consideration under the 
procedures set forth in Section 19(b)(2), such as those involving 
possible burdens on competition or effects on investor protection. 
Accordingly, the Commission is delegating this function, as well as the 
related functions of shortening the 30 and five-day periods under 
paragraph (e)(6) of Rule 19b-4, to the Director of the Division.
    In addition, the Commission is delegating to the Director of the 
Division the authority under Section 19(b)(2)(B) of the Exchange Act to 
institute proceedings to determine whether a proposed rule change 
should be disapproved.64 It is the Commission's view at this time 
that filings that are not resolved within six months of submission 
generally should be withdrawn or, in the alternative, subject to 
disapproval proceedings. Although the Commission has directed its staff 
to request that SROs withdraw a number of filings of proposed rule 
changes not approved within that period, this delegation of authority 
is necessary to enable the Division to implement these internal 
guidelines.
---------------------------------------------------------------------------

    \6\415 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    The Commission does not intend to prevent SROs from moving forward 
with their rule changes. The Commission suggests, however, that when it 
becomes obvious that a resolution of issues for a particular filing is 
not forthcoming, it may be more appropriate for the SRO to advance the 
initiative outside of the rule filing mechanism until such time as it 
is in form for approval. The staff of the Commission will be available 
to assist SROs in this regard.65 The Commission believes that this 
will maintain accountability on the part of both Commission staff and 
SROs by assuring that complex filings are not abandoned and allowed to 
stagnate within the rule filing process. These amendments add new 
paragraphs (a)(57), (a)(58), and (a)(59) to Rule 30-3 of the 
Commission's rules of Organization and Program Management.
---------------------------------------------------------------------------

    \6\5The Commission recognizes that in certain instances there 
will be differences in opinion between the staff and SROs regarding 
the handling of a rule filing. In such instances, the SROs are 
always free to inform the Commission so that it may help expedite 
the processing of the filing in an appropriate manner.
---------------------------------------------------------------------------

D. Submission of Form 19b-4 on Computer Diskette and Miscellaneous 
Amendments

    The Commission noted in the Proposing Release that significant 
staff resources are devoted to processing proposed rule changes and 
preparing them for publication, and encouraged SROs to submit Form 19b-
4 and the notice for publication (Exhibit 1 to the form) on computer 
diskette in an appropriate wordprocessing format.66 The paper 
version of these documents would continue to be required, but the 
electronic version would provide a more efficient way for Commission 
staff to review and prepare the initial notice for publication in the 
Federal Register.
---------------------------------------------------------------------------

    \6\6Currently, the staff of the Commission uses Wordperfect 5.0.
---------------------------------------------------------------------------

    The Commission also is adopting amendments as proposed that will 
reduce the number of copies of Form 19b-4 and Exhibit 1 that SROs must 
submit from twelve to nine, including the manually signed original. 
Although the Commission originally proposed reducing the number of 
copies to eight, it has determined that nine copies would be optimal 
based on current staff distribution requirements. In addition, the 
Commission is correcting miscellaneous outdated references contained in 
the form with respect to the Commission's address and appropriate 
offices within the Division to which filings of proposed rule changes 
should be directed.

III. Amendments to the Annual Filing Requirements for SROs and the 
MSRB

    A registered or exempted securities exchange generally must file 
annual amendments to its registration statement with the Commission 
pursuant to Rule 6a-2 under the Exchange Act.67 The information 
contained in these annual filings includes, among other things, lists 
of officers, governors, and committee members, as well as various forms 
used by the exchange, listing applications, listing fee schedules, 
membership lists, and securities listed on the exchange.68 
Exchange Act rules also contain similar annual filing requirements for 
national securities associations69 and the MSRB.70
---------------------------------------------------------------------------

    \6\7Exchange Act Rule 6a-2, 17 CFR 240.6a-2. These filings are 
submitted on Exchange Act Form 1-A, 17 CFR 249.1a.
    \6\8Rule 6a-2(b) also requires the filing of complete sets of 
the constitution, by-laws, rules, and related documents of the 
exchange, but only once every three years.
    \6\9See Exchange Act Rule 15Aj-1, 17 CFR 240.15Aj-1; Form X-
15AJ-2, 17 CFR 249.803. Currently, the NASD is the only national 
securities association registered with the Commission.
    \7\0See Exchange Act Rule 17a-21, 17 CFR 240.17a-21.
---------------------------------------------------------------------------

    In the Proposing Release, the Commission stated that some of this 
information is either publicly available, becomes available to the 
Commission through other means, or is not useful enough to justify the 
burden placed on the exchanges in collecting and filing it with the 
Commission each year. The Commission thus proposed amendments to 
streamline and conform the annual filing requirements for SROs.

A. Rule 6a-2: Annual Filing Requirements of Exchanges

    The proposed amendments would eliminate or reduce the annual filing 
requirement for certain information, and give exchanges flexibility in 
making their filings. Commenters supported this proposal. The NYSE 
suggested that the Commission adopt more extensive amendments that 
would relieve SROs of the need to file any information annually that is 
made available to the Commission throughout the year in periodic 
publications, such as an exchange's bulletins and information memos.
    The Commission has determined to adopt the amendments to Rule 6a-2 
as proposed, with the exception of one minor modification concerning 
the proposal to add the date of election to membership for each member, 
discussed below at Section III.B. The amendments to Rule 6a-2 will 
eliminate or reduce the information required to be filed annually in 
the following exhibits to exchange registration: Exhibit B (forms 
pertaining to application for membership and approval as a person 
associated with a member); Exhibit C (forms of financial statements, 
reports, or questionnaires relating to financial responsibility); 
Exhibit D (documents comprising listing applications including 
agreements required in connection therewith, and a schedule of listing 
fees); Exhibit I (list of all individual members and related 
information); Exhibit J (certain information related to a list of all 
member organizations of the exchange); and Exhibit K (schedule of 
securities listed on the exchange).
    In addition, the amendments to Rule 6a-2 would provide the 
following alternatives to the annual filing requirement for the 
remaining exhibits to exchange registration other than Exhibits E and F 
(i.e., Exhibits A(1), A(2), A(3), G, H, J, L, and M).71 Exchanges 
would have the option, in lieu of the annual filing, to publish or 
cooperate in the publication of this information on an annual or more 
frequent basis, and to certify to the accuracy of the information. 
Exchanges would have the additional option of keeping the information 
in Exhibits A(1), A(2), A(3), L, and M up to date, and certifying that 
the information is up to date and available to the Commission and the 
public upon request.
---------------------------------------------------------------------------

    \7\1Exhibit A(1) contains the constitution, articles of 
incorporation, by-laws, and rules of the exchange; Exhibit A(2) 
contains written rulings, settled practices, and interpretations not 
contained in A(1); Exhibit A(3) contains the constitution, articles 
of incorporation, by-laws, and rules of each affiliate or subsidiary 
of the exchange; Exhibit G contains a list of officers and committee 
members; Exhibit H contains similar information for affiliates or 
subsidiaries; Exhibit L contains a schedule of securities admitted 
to unlisted trading practices; and Exhibit M contains a schedule of 
unregistered securities admitted to trading on the exchange that are 
exempt from registration.
---------------------------------------------------------------------------

    In response to the recommendation that SROs be relieved of the need 
to file altogether any information that may be available to the 
Commission, the Commission believes that it would be inconsistent with 
the requirements of Section 6 of the Exchange Act to rely upon 
informal, piecemeal publications as a surrogate for a comprehensive 
filing that is a component of an exchange's registration with the 
Commission. Furthermore, some of the required exhibits deal with 
financial information of the exchange that enable the Commission to 
comply with its obligations to provide Congress with a statement and 
analysis of the expenses and operations of each SRO.72
---------------------------------------------------------------------------

    \7\2See Exchange Act Sec. 23(b), 15 U.S.C. 78w(b).
---------------------------------------------------------------------------

B. Rule 15Aj-1 and Form X-15AJ-2; Rule 17a-21: Annual Filing 
Requirements for Securities Associations and Reports of the Municipal 
Securities Rulemaking Board

    Both the NASD and the MSRB endorsed the proposal to streamline 
their annual filing requirements and conform them to the requirements 
now applicable to exchanges.73 The Commission is adopting 
amendments to Rules 15Aj-1, 17a-21, and Form X-15AJ-2 under the 
Exchange Act to streamline the annual filing requirements for the NASD 
and MSRB and make them more uniform. Like exchanges, these SROs will 
have similar alternative options for the filing of comparable 
information.
---------------------------------------------------------------------------

    \7\3In its comment letter, the NASD also recommended that the 
Commission review the filing requirements applicable to exclusive 
securities information processors (``SIPs''), similarly to eliminate 
obsolete or duplicate filing requirements. This suggestion is 
outside the scope of the original proposal. Nevertheless, the 
Commission intends to review and streamline the annual filing 
requirements applicable to exclusive SIPs.
---------------------------------------------------------------------------

    With respect to the proposal to add the date of election to 
membership for each member, the NASD commented that in some cases this 
date is not readily available and may be difficult to report. While the 
Commission is adopting the requirement to add the date of election to 
membership for each member, this information will be required only for 
those members elected to membership after December 31, 1994. A 
conforming modification also has been made to Rule 6a-2 for exchanges, 
thus applying the same standard to all SROs. This information serves an 
important purpose by enabling Commission staff to monitor the 
obligation of broker-dealers to become members of an SRO,74 and 
designate an appropriate designated examining authority for member 
broker-dealers.75
---------------------------------------------------------------------------

    \7\4Exchange Act Sec. 15(b)(8), 15 U.S.C. 78o(b)(8). The 
importance of this information is also highlighted by Exchange Act 
Sec. 15(b)(1)(B), 15 U.S.C. 78o(b)(1)(B), as amended by the 
Government Securities Act Amendments of 1993, Pub. L. No. 103-202, 
107 Stat. 2345 (1993), which conditions the effectiveness of broker-
dealer registration with the Commission on such SRO membership.
    \7\5Where a broker-dealer is a member of more than one SRO, the 
Commission has authority to designate to one SRO the responsibility 
for examining the member for compliance with applicable financial 
responsibility rules. Exchange Act Sec. 17(d)(1), 15 U.S.C. 
78q(d)(1); 17 CFR 240.17d-1.
---------------------------------------------------------------------------

IV. Effects on Competition and Regulatory Flexibility Act 
Considerations

    Section 23(a)76 of the Act requires the Commission, in 
adopting rules under the Act, to consider the impact on competition of 
those rules, if any, and to balance that impact against the regulatory 
benefits gained in terms of furthering the purposes of the Act. The 
amendments to Rule 19b-4 apply to all SROs. Furthermore, the amendments 
are intended to expedite for all SROs a process to which they already 
are subject under the Act. Similarly, the amendments to the annual 
filing requirements for SROs are designed to streamline and make 
uniform those requirements. The Commission is of the view, therefore, 
that adoption of the proposed amendments to Rules 19b-4, 6a-2, 15Aj-1, 
17a-21, and Forms 19b-4 and X-15AJ-2 would not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act.
---------------------------------------------------------------------------

    \7\615 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    In addition, Section 3(a) of the Regulatory Flexibility Act77 
requires the Commission to undertake an initial regulatory flexibility 
analysis of the proposed amendments on small entities unless the 
Chairman certifies that the rule, if adopted, would not have a 
significant economic impact on a substantial number of small 
entities.78 Rule 19b-4 and Form 19b-4 apply only to SROs. Rule 6a-
2 applies only to national securities exchanges. Rule 15Aj-1 and Form 
X-15AJ-2 apply only to national securities associations. Rule 17a-21 
applies only to the MSRB. Furthermore, the proposed amendments are 
intended to streamline a process to which these SROs already are 
subject. In the Proposing Release, the Commission indicated that the 
Chairman has certified that the amendments to Rule 19b-4, Form 19b-4, 
and Rule 6a-2 would not have a significant economic impact on a 
substantial number of small entities. The Commission did not receive 
any comments on the regulatory flexibility certification. The Chairman 
also has certified that the amendments to Rules 15Aj-1 and 17a-21, and 
Form X-15AJ-2 would not have a significant economic impact on a 
substantial number of small entities. This certification, including the 
reasons therefore, is attached as Appendix A to this release.
---------------------------------------------------------------------------

    \7\75 U.S.C. 603(a).
    \7\85 U.S.C. 605(b).
---------------------------------------------------------------------------

List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Authority delegations 
(Government agencies), Organizations and functions (Government 
organizations).

17 CFR Parts 240 and 249

    Reporting and recordkeeping requirements, Securities.

Statutory Basis and Text of Proposed Amendments

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is amended as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

    1. The authority citation for Part 200, subpart A continues to read 
in part as follows:

    Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 79t, 
77sss, 80a-37, 80b-11, unless otherwise noted.
* * * * *
    2. Section 200.30-3 is amended by adding paragraphs (a)(57), 
(a)(58), and (a)(59) to read as follows:


Sec. 200.30-3  Delegation of authority to Director of Division of 
Market Regulation.

* * * * *
    (a) * * *
    (57) Pursuant to Section 19(b)(2)(B) of the Act, 15 U.S.C. 
78s(b)(2)(B), to institute proceedings to determine whether a proposed 
rule change of a self-regulatory organization should be disapproved.
    (58) Pursuant to Section 19(b)(3)(C) of the Act, 15 U.S.C. 
78s(b)(3)(C), to abrogate a change in the rules of a self-regulatory 
organization and require that it be refiled in accordance with Section 
19(b)(1), 15 U.S.C. 78s(b)(1), and reviewed in accordance with Section 
19(b)(2), 15 U.S.C. 78s(b)(2), of the Act.
    (59) Pursuant to paragraph (e)(6)(iii) of Rule 19b-4 (Sec. 240.19b-
4 of this chapter), to reduce the period before which a proposed rule 
change can become operative, and to reduce the period between an SRO 
submission of a filing and a pre-filing notification.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    3. The authority citation for Part 240 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg, 
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p, 
78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-
37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *


Sec. 2640.6a-2  [Amended]

    4. Paragraph (a)(1) of Sec. 240.6a-2 is amended by removing ``, or 
in Exhibits B, C and D,'' and ``and Exhibits B, C and D''.
    5. Revise paragraph (a)(3) of Sec. 240.6a-2 to read as follows:


Sec. 240.6a-2  Periodic amendments to registration statements or 
exemption statements of exchanges.

    (a) * * *
    (3) Complete Exhibits G, H, J, L and M, which shall be up to date 
as of the latest practicable date within 3 months of the date on which 
the annual amendment is filed, except that:
    (i) Exhibit J need only contain the name and principal place of 
business of each member organization, and for each member organization 
elected to membership after December 31, 1994, the date of election to 
membership;
    (ii) If a national securities exchange publishes or cooperates in 
the publication of the information required in these exhibits on an 
annual or more frequent basis, in lieu of filing such an exhibit a 
national securities exchange may:
    (A) Identify the publication in which such information is 
available, the name, address, and telephone number of the person from 
whom such publication may be obtained, and the price thereof; and
    (B) Certify to the accuracy of such information as of its date;
    (iii) If a national securities exchange keeps the information 
required in Exhibits L and M up to date and makes it available to the 
Commission and the public on request, in lieu of filing such an 
exhibit, a national securities exchange may certify that the 
information is kept up to date and is available to the Commission and 
the public upon request.
* * * * *
    6. Section 240.6a-2 is amended by revising paragraph (b) to read as 
follows:


Sec. 240.6a-2  Periodic amendments to registration statements or 
exemption statements of exchanges.

* * * * *
    (b) Unless exempted pursuant to paragraph (c) of this section, on 
or before June 30, 1983, and every three years thereafter each exchange 
registered as a national securities exchange shall file complete 
Exhibits A(1), A(2) and A(3) to its registration statement, which shall 
be up to date as of the latest practicable date within 3 months of the 
date on which these exhibits are filed, except that:
    (1) If a national securities exchange publishes or cooperates in 
the publication of the information required in these exhibits on an 
annual or more frequent basis, in lieu of filing such an exhibit a 
national securities exchange may:
    (i) Identify the publication in which such information is 
available, the name, address, and telephone number of the person from 
whom such publication may be obtained, and the price thereof; and
    (ii) Certify to the accuracy of such information as of its date;
    (2) If a national securities exchange keeps the information 
required in these exhibits up to date and makes it available to the 
Commission and the public on request, in lieu of filing such an 
exhibit, a national securities exchange may certify that the 
information is kept up to date and is available to the Commission and 
the public upon request.
* * * * *
    7. Paragraph (c)(1) of Sec. 240.15Aj-1 is revised to read as 
follows:


Sec. 240.15Aj-1  Amendments and supplements to registration statements 
of securities associations.

* * * * *
    (c) Annual supplements. (1) Promptly after March 1 of each year, 
the association shall file with the Commission an annual consolidated 
supplement as of such date on Form X-15AJ-2 (Sec. 249.803) except that:
    (i) If the securities association publishes or cooperates in the 
publication of the information required in Items 6(a) and 6(b) of Form 
X-15AJ-2 on an annual or more frequent basis, in lieu of filing such an 
item the securities association may:
    (A) Identify the publication in which such information is 
available, the name, address, and telephone number of the person from 
whom such publication may be obtained, and the price thereof; and
    (B) Certify to the accuracy of such information as of its date.
    (ii) Promptly after March 1, 1995, and every three years thereafter 
each association shall file complete Exhibit A to Form X-15AJ-2. The 
information contained in this exhibit shall be up to date as of the 
latest practicable date within 3 months of the date on which these 
exhibits are filed. If the association publishes or cooperates in the 
publication of the information required in this exhibit on an annual or 
more frequent basis, in lieu of filing such exhibit the association 
may:
    (A) Identify the publication in which such information is 
available, the name, address, and telephone number of the person from 
whom such publication may be obtained, and the price thereof; and
    (B) Certify to the accuracy of such information as of its date. If 
a securities association keeps the information required in this exhibit 
up to date and makes it available to the Commission and the public upon 
request, in lieu of filing such an exhibit a securities association may 
certify that the information is kept up to date and is available to the 
Commission and the public upon request.
* * * * *
    8. By revising paragraph (a)(4) of Sec. 240.17a-21 to read as 
follows:


Sec. 240.17a-21  Reports of the Municipal Securities Rulemaking Board.

    (a) * * *
    (4) The Municipal Securities Rulemaking Board shall include in its 
annual report a statement and an analysis of its expenses and 
operations including:
    (i) A balance sheet as of the end of the period covered by the 
report and a statement of revenues and expenses for the Board for that 
period;
    (ii) The rules of the Board including any written interpretations 
of the rules or staff interpretive letters, except that this 
information may be included in the annual report once every three years 
and shall be up to date as of the latest practicable date within 3 
months of the date on which this information is filed. If the Board 
publishes or cooperates in the publication of this information on an 
annual or more frequent basis, in lieu of including such information in 
the annual report the Board may:
    (A) Identify the publication in which such information is 
available, the name, address, and telephone number of the person from 
whom such publication may be obtained, and the price thereof; and
    (B) Certify to the accuracy of such information as of its date. If 
the Board keeps this information up to date and makes it available to 
the Commission and the public upon request, in lieu of filing such 
information the Board may certify that the information is kept up to 
date and is available to the Commission and the public upon request;
    (iii) The following information concerning members of the Board:
    (A) Name;
    (B) Dates of commencement and termination of present term of 
office;
    (C) Length of time each member has held such office;
    (D) Name of principal organization with which connected;
    (E) Title; and
    (F) City wherein the principal office of such organization is 
located;
    (iv) Address of the Board, the name and address of each person 
authorized to receive notices on behalf of the Board from the 
Commission, and the name and address of counsel to the Board, if any; 
and
    (v) A list, including addresses, as of the latest practicable date, 
alphabetically arranged, of all municipal securities brokers and 
municipal securities dealers which have paid to the Board fees and 
charges to defray the costs and expenses of operating the Board.
* * * * *
    9. Paragraph (e) of Sec. 240.19b-4 is revised to read as follows:


Sec. 240.19b-4  Filings with respect to proposed rule changes by self-
regulatory organizations.

* * * * *
    (e) A proposed rule change may take effect upon filing with the 
Commission pursuant to Section 19(b)(3)(A) of the Act, 15 U.S.C. 
78s(b)(3)(A), if properly designated by the self-regulatory 
organization as:
    (1) Constituting a stated policy, practice, or interpretation with 
respect to the meaning, administration, or enforcement of an existing 
rule;
    (2) Establishing or changing a due, fee, or other charge;
    (3) Concerned solely with the administration of the self-regulatory 
organization;
    (4) Effecting a change in an existing service of a registered 
clearing agency that:
    (i) Does not adversely affect the safeguarding of securities or 
funds in the custody or control of the clearing agency or for which it 
is responsible; and
    (ii) Does not significantly affect the respective rights or 
obligations of the clearing agency or persons using the service;
    (5) Effecting a change in an existing order-entry or trading system 
of a self-regulatory organization that:
    (i) Does not significantly affect the protection of investors or 
the public interest;
    (ii) Does not impose any significant burden on competition; and
    (iii) Does not have the effect of limiting the access to or 
availability of the system; or
    (6) Effecting a change that:
    (i) Does not significantly affect the protection of investors or 
the public interest;
    (ii) Does not impose any significant burden on competition; and
    (iii) By its terms, does not become operative for 30 days after the 
date of the filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest; provided that the self-regulatory organization has given the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission.
* * * * *

PART 249--FORM, SECURITIES EXCHANGE ACT OF 1934

    10. The authority citation for Part 249 continues to read in part 
as follows:

    Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *


Sec. 249.803  [Amended]

    11. Form X-15AJ-2 (referenced in Sec. 249.803) is amended by 
removing items numbered 7 through 28 and redesignating item 29 as 
number 7.

    Note: Form X-15AJ-2 does not and these amendments will not 
appear in the Code of Federal Regulations.


Sec. 249.803  [Amended]

    12. Form X-15AJ-2 (referenced in Sec. 249.803) is amended by 
revising Exhibit C to reads as follows:

    Note: Form X-15AJ-2 does not and these amendments will not 
appear in the Code of Federal Regulations.

Form X-15AJ-2
* * * * *

Exhibits to be Furnished With This Supplement

* * * * *
    Exhibit C. A list, as of latest practicable date, alphabetically 
arranged, of all members of the association indicating for each--
    (1) the name;
    (2) the principal place of business; and
    (3) the date of election to membership for each member elected 
to membership after December 31, 1994.


Sec. 249.819  [Amended]

    13. By revising the first sentence of instruction F of the general 
instructions of Form 19b-4 (referenced in Sec. 249.819) to read as 
follows, and by removing the asterisk contained therein along with its 
accompanying footnote:

    Note: Form 19b-4 does not and these amendments will not appear 
in the Code of Federal Regulations.

Form 19b-4
* * * * *

General Instructions

* * * * *

F. Signature and Filing of the Completed Form

    Nine copies of Form 19b-4, nine copies of Exhibit 1, four copies 
of Exhibits 2 and 3, and two copies of Exhibit 4 shall be filed 
with, in the case of filings by securities exchanges, the Assistant 
Director for Derivatives and Exchange Oversight, in the case of 
filings by securities associations or the Municipal Securities 
Rulemaking Board, the Assistant Director for NMS and OTC, and in the 
case of filings by clearing agencies, the Assistant Director for 
Securities Processing, Division of Market Regulation, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549. 
* * *
* * * * *


Sec. 249.819  [Amended]

    14. Item 7 of the Information to Be Included in the Completed Form 
of Form 19b-4 (referenced in Sec. 249.819) is amended by removing the 
word ``or'' from the end of paragraph (b)(iii) and adding paragraphs 
(b)(v) and (b)(vi) to read as follows:

    Note: Form 19b-4 does not and these amendments will not appear 
in the Code of Federal Regulations.

Form 19b-4
* * * * *
    7. Basis for Summary Effectiveness Pursuant to Section 19(b)(3) 
or for Accelerated Effectiveness Pursuant to Section 19(b)(2).
* * * * *
    (b) * * *
    (v) effects a change in an existing order-entry or trading 
system of a self-regulatory organization that (A) does not 
significantly affect the protection of investors or the public 
interest; (B) does not impose any significant burden on competition; 
and (C) does not have the effect of limiting the access to or 
availability of the system, or
    (vi) effects a change that (A) does not significantly affect the 
protection of investors or the public interest; (B) does not impose 
any significant burden on competition; and (C) by its terms, does 
not become operative for 30 days after the date of the filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest; provided that 
the self-regulatory organization has given the Commission written 
notice of its intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. If it 
is requested that the proposed rule change become operative in less 
than 30 days, provide a statement explaining why the Commission 
should shorten this time period.
* * * * *


Sec. 249.819  [Amended]

    15. Section IV of Exhibit 1 of Form 19b-4 (referenced in 
Sec. 249.819) is amended by removing ``500 North Capitol Street,'' and 
adding in its place ``450 Fifth Street, N.W.,'' and removing ``Public 
Reference Section, 1100 L Street N.W.,'' and adding in its place 
``Public Reference Room in''.

    Note: Form 19b-4 does not and these amendments will not appear 
in the Code of Federal Regulations.

    By the Commission.

    Dated: December 20, 1994.
Margaret H. McFarland,
Deputy Secretary.

    Note: This Appendix to the Preamble will not appear in the Code 
of Federal Regulations

Appendix A

Securities and Exchange Commission Regulatory Flexibility Act 
Certification

    I Arthur Levitt, Chairman of the Securities and Exchange 
Commission, hereby certify pursuant to 5 U.S.C. 605(b) that proposed 
amendments to Rules 15Aj-1 and 17a-21, and Form X-15AJ-2 under the 
Securities Exchange Act of 1934 set forth in Securities Exchange Act 
Release No. 35123, if promulgated, will not have a significant economic 
impact on a substantial number of small entities. The reason for this 
certification is that the rules and form apply only to the National 
Association of Securities Dealers and the Municipal Securities 
Rulemaking Board, and consequently would not impose any significant 
economic impact on a substantial number of small entities, as that term 
is defined under the Regulatory Flexibility Act. Furthermore, the 
proposed amendments are intended to streamline a process to which these 
self-regulatory organizations already are subject.

    Dated: December 20, 1994.
Arthur Levitt,
Chairman.
[FR Doc. 94-31657 Filed 12-27-94; 8:45 am]
BILLING CODE 8010-01-P