[Federal Register Volume 59, Number 249 (Thursday, December 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31995]


[[Page Unknown]]

[Federal Register: December 29, 1994]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35133; File No. SR-NASD-94-63]

 

Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Filing and Order Granting Accelerated Approval of a 
Proposed Rule Change

December 21, 1994.
    Prusuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 23, 1994, the 
National Association of Securities Dealers, Inc. (``NASD'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the NASD. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

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

    The NASD is proposing to amend its Policy Statement on Market 
Closings (``Statement'' or ``Policy Statement''), adopted pursuant to 
Article VII, Section 3 of the NASD By-Laws,\2\ to extend its expiration 
date on year to December 31, 1995. No other terms of the Policy 
Statement are proposed to be amended.
---------------------------------------------------------------------------

    \2\NASD Manual, By-Laws, Art. VII, Sec. 3, (CCH) 1182A.
---------------------------------------------------------------------------

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

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

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

    The Policy Statement was adopted as a rule proposal of the NASD 
under Article VII, Section 3 of the NASD By-Laws. The Statement 
provides the NASD with authority, acting through a designated committee 
of the Board of Governors, to take appropriate action in the event of 
an emergency or extraordinary market conditions. Article VII, Section 3 
was adopted by the NASD as a result of the events of October 1987. The 
provision was drafted to enable the NASD to respond to future crises 
with a maximum degree of flexibility, providing properly tailored 
responses to varying situations.\3\
---------------------------------------------------------------------------

    \3\The Release approving the Policy Statement stated that ``the 
Commission believes the proposal provides the NASD with the 
flexibility to deal with extraordinary market conditions such as 
existed in October, 1987.'' Securities Exchange Act Release No. 
26072 (September 12, 1988), 53 FR 36143.
---------------------------------------------------------------------------

    The Commission requested the NASD to express its views on the 
``circuit breaker'' proposal of the President's Working Group on 
Financial Markets, and the Policy Statement was adopted in response to 
that request. The Policy Statement was approved on October 19, 1988.\4\ 
As originally approved, the Policy Statement was to expire December 31, 
1989, unless modified or extended before then by the NASD. The 
expiration date of the Policy Statement has been extended a number of 
times.\5\
---------------------------------------------------------------------------

    \4\See Securities Exchange Act Release No. 26198 (October 19, 
1988), 53 FR 41673.
    \5\Securities Exchange Act Release Nos. 27370, (October 23, 
1989), 54 FR 43881 (approving File No. SR-NASD-89-46, extending 
expiration date through December 31, 1990); 28694 (December 12, 
1990), 55 FR 52119 (approving File No. SR-NASD-90-60, extending 
expiration date through December 31, 1991); 30113 (December 20, 
1991), 56 FR 67341 (File No. SR-NASD-91-70, extending expiration 
date through January 31, 1992); 30304 (January 29, 1992), 57 FR 4658 
(approving File No. SR-NASD-92-02, extending expiration date through 
December 31, 1993); and 33292 (December 6, 1993), 58 FR 65214 (File 
No. SR-NASD-93-70, extending expiration date through December 31, 
1994).
---------------------------------------------------------------------------

    The Policy Statement expresses the views of the NASD Board of 
Governors as of July 16, 1993 concerning progress made on the numerous 
proposals emanating from the October 1987 crisis. From time to time, 
the Board will review progress made on the recommendations set forth in 
the Statement as well as other developments as they may occur. The 
views of the Board may change and the NASD may modify or amplify the 
Statement accordingly. It should also be noted that the Policy 
Statement sets forth the NASD's proposed response to a specific set of 
circumstances. The Statement does not in any way preclude the NASD from 
taking any other action that may be appropriate under other 
circumstances. The NASD is proposing to extend the expiration date of 
the Policy Statement for one year to December 31, 1995 The NASD is 
concerned regarding the diminishing percentage relationship between the 
250 and 400 point thresholds and the increasing level of the Dow Jones 
Industrial Average. It is the intention of the NASD to reevaluate the 
thresholds in the Policy Statement.
    The NASD believes the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act, as the Policy Statement is 
designed to foster cooperation and coordination with the Commission and 
the other self-regulatory organizations engaged in regulating the 
United States securities markets.

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

    The NASD does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members Participants, or Others

    Written comments were neither solicited nor received.

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

    The NASD has requested that the Commission find good cause pursuant 
to Section 19(b)(2) for approving the proposed rule change prior to the 
thirtieth day after publication in the Federal Register. In support of 
its request, the NASD stated that the Policy Statement will expire on 
December 31, 1994 unless the proposed rule change is approved prior 
thereto, and that the proposed rule change merely extends the Policy 
Statement and makes no other change to the terms of the Policy 
Statement. Moreover, no public comments have been received in response 
to the prior publications for comment of the NASD's proposals extending 
the Policy Statement.
    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to the NASD, and, in particular, the requirements 
of Section 15A and the rules and regulations thereunder. Since the 
Commission approved the NASD's proposal in 1988, the Dow Jones 
Industrial Average has not experienced a one day market decline that 
would trigger a market halt. Nevertheless, the Commission continues to 
believe that circuit breaker procedures are desirable to deal with 
potential strains that may develop during periods of extreme market 
volatility, and, accordingly, the Commission believes that the pilot 
program should be extended. The Commission also believes that circuit 
breakers represent a reasonable means to retard a rapid one day market 
decline that can have a destabilizing effect on the nation's financial 
markets and participants in these markets.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register because there are no 
changes being made to the current provisions, which originally were 
subject to the full notice and comment procedures, and accelerated 
approval would enable the Policy Statement to continue uninterrupted. 
The Commission believes, therefore, that granting accelerated approval 
of the proposed rule change is appropriate and consistent with Sections 
15A and 19(b) of the Act.\6\
---------------------------------------------------------------------------

    \6\The Commission reaffirms its request that the NASD implement 
its Policy Statement by implementing a trading halt as quickly as 
practicable whenever the New York Stock Exchange and other equity 
markets have suspended trading. See Securities Exchange Act Release 
No. 27370, supra note 5.
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the 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 in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to the file number in the caption 
above and should be submitted by January 19, 1995.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-NASD-94-63) is hereby 
approved until December 31, 1995.

    \7\15 U.S.C. 78s(b)(2) (1988).
---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\17 CFR 200.30-3(a)(12) (1993).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-31995 Filed 12-28-94; 8:45 am]
BILLING CODE 8010-01-M