[Federal Register Volume 60, Number 34 (Tuesday, February 21, 1995)]
[Notices]
[Pages 9704-9708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4085]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35364; File No. SR-NASD-95-8]


Self-Regulatory Organizations; Notice of Proposed Rule Change by 
the National Association of Securities Dealers, Inc., Relating to a Six 
Month Extension of the SOES Minimum Exposure Limit Rule and the SOES 
Automated Quotation Update Feature

February 13, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 10, 1995, the 
National Association of Securities Dealers, Inc. (``NASD'' or 
``Association'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the NASD. 
The Commission in publishing this notice to solicit comments on the 
proposed rule change from interested persons.

    \1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD proposed to extend, until October 2, 1995, the 
effectiveness of certain rules governing the operation of The Nasdaq 
Stock Market, Inc.'s (``Nasdaq'') Small Order Execution System 
(``SOES''). Specifically, these SOES rules, which were previously 
approved by the Commission on a pilot basis on December 23, 1993\2\ and 
recently extended through March 27, 1995,\3\ provide for: (1) a 
reduction in the minimum exposure limit for unpreferenced SOES orders 
from five times the maximum order size to two times the maximum order 
size, and for the elimination of exposure limits for preferenced orders 
(``SOES Minimum [[Page 9705]] Exposure Limit Rule''); and (2) 
implementation of an automated function for updating market maker 
quotations when the market maker's exposure limit has been exhausted 
(``SOES Automated Quotation Update Feature''). These rules are part of 
a set of SOES rules approved by the SEC on a pilot basis known as the 
Interim SOES Rules.\4\

    \2\See Securities Exchange Act Release No. 33377 (Dec. 23, 
1993), 58 FR 69419 (Dec. 30, 1993) (``Interim SOES Rules Approval 
Order'').
    \3\See Securities Exchange Act Release No. 35275 (Jan. 25, 
1995), 60 FR 6327 (Feb. 1, 1995) (``Interim SOES Rules Extension 
Order'').
    \4\As first approved by the Commission on December 23, 1993, the 
Interim SOES Rules had four components: (1) The SOES minimum 
Exposure Limit; (2) the Automated Quotation Update; (3) a reduction 
in the maximum size order eligible for execution through SOES from 
1,000 shares to 500 shares (``SOES Maximum Order Size''); and (4) 
the prohibition of short sales through SOES. In light of the SEC's 
approval of the NASD's short sale rule in June 1994, the NASD did 
not seek to extend the prohibition against the entry of short sales 
into SOES. Absent SEC approval of an extension of the effectiveness 
of the SOES Maximum Order Size rule, the rule will lapse effective 
March 28, 1995.
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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

    On December 23, 1993, the SEC issued an order approving the Interim 
SOES Rules on a one-year pilot basis effective January 7, 1994. In 
response to two applications requesting a stay of the Interim SOES 
Rules Approval Order, however, the SEC granted a partial stay of the 
effective date of the order through January 25, 1994. Thus, absent 
further Commission action, the Interim SOES Rules initially were 
effective from January 26, 1994 through January 25, 1995.\5\ On January 
25, 1995, the SEC approval an NASD proposal to extend the effectiveness 
of the Interim SOES Rules through March 27, 1995.\6\

    \5\Securities Exchange Act Release No. 33377 (Dec. 23, 1993), 58 
FR 69419 (Dec. 30, 1993) (approving the Interim SOES Rules on a one-
year pilot basis effective January 7, 1994). See also Securities 
Exchange Act Release No. 33424 (Jan. 5, 1994) (order denying stay 
and granting interim stay through January 25, 1994) and Securities 
Exchange Act Release No. 33635 (Feb. 17, 1994) (order denying 
renewed application for stay).
    \6\See SOES Interim Rules Extension Order, supra note 3.
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    As described in more detail below, because the NASD believes 
implementation of the SOES Minimum Exposure Limit rule and the SOES 
Automated Quotation Update Feature have been associated with positive 
developments in the markets for Nasdaq securities and clearly have not 
had any negative effect on market quality, the NASD believes it is 
appropriate and consistent with the maintenance of fair and orderly 
markets and the protection of investors to extend the effectiveness of 
these rules. In addition, consistent with the termination of the 
Interim SOES Rule that prohibited the entry of short sales into SOES, 
the NASD believes its instant proposal to continue the effectiveness of 
some but not all of the original components of the Interim SOES Rules 
is appropriate and consistent with the Act. While the NASD believes the 
Interim SOES Rules collectively have had a beneficial impact on the 
market, the NASD also believes that each of the Interim SOES Rules has 
individually had a benefit on the market. Thus, each one of the Interim 
SOES Rules can be evaluated for consistency with the Act independent of 
the others. The SOES Minimum Exposure Limit rule and the SOES Automated 
Quotation Update Feature reflect a reasoned approach by the NASD to 
address the adverse effects on market liquidity attributable to active 
intra-day trading activity through SOES, while at the same time not 
compromising the ability of small, retail investors to receive 
immediate executions through SOES. Specifically, these rules are 
designed to address concerns that concentrated, aggressive use of SOES 
by a growing number of order entry firms has resulted in increased 
volatility in quotations and transaction prices, wide spreads, and the 
loss of liquidity for individual and institutional investor orders.
    The NASD believes that the same arguments and justifications made 
by the NASD in support of approval of the SOES Minimum Exposure Limit 
rule and the SOES Automated Quotation Update Feature are just as 
compelling today as they were when the SEC relied on them to initially 
approve the rules. In sum, the NASD continues to believe that 
concentrated bursts of SOES activity by active order-entry firms 
contributed to increased short-term volatility, wider spreads, and less 
market liquidity on Nasdaq and that the SOES Minimum Exposure Limit 
rule and the SOES Automated Quotation Update Feature are an effective 
means to minimize these adverse market impacts.
    The NASD also notes that the SEC made specific findings in the 
Interim SOES Rules Approval Order that the SOES Minimum Exposure Limit 
rule and the SOES Automated Quotation Update Feature were consistent 
with the Act. In particular, the SEC stated in its approval order that:

    a. Because the benefits for market quality of restricting SOES 
usage outweigh any potential decrease in pricing efficiency, the 
Commission concludes that the net effect of the proposal is to 
remove impediments to the mechanism of a free and open market and a 
national market system, and to protect investors and the public 
interest, and that the proposed rule changes are designed to produce 
accurate quotations, consistent with Section 15A(b)(6) and 
16A(b)(11) of the Act. In addition, the Commission concludes that 
the benefits of the proposal in terms of preserving market quality 
and preserving the operational efficiencies of SOES for the 
processing of small size retail orders outweigh any potential burden 
on competition or costs to customers or broker-dealers affected 
adversely by the proposal. Thus, the Commission concludes that the 
proposal is consistent with Section 15A(b)(9) of the Act in that it 
does not impose a burden on competition which is not necessary or 
appropriate in furtherance of the purposes of the Act.\7\

    \7\Interim SOES Rules Approval Order, supra note 2, 58 FR at 
69423 (footnote omitted).
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    b. The Commission also concludes that the proposal advances the 
objectives of Section 11A of the Act. Section 11A provides that it 
is in the public interest and appropriate for the protection of 
investors and the maintenance of fair and orderly markets to assure 
economically efficient execution of securities transactions, fair 
competition among market participants, and the practicality of 
brokers executing orders in the best market. The Commission 
concludes that the proposal furthers these objectives by preserving 
the operational efficiencies of SOES for the processing of small 
orders from retail investors.\8\

    \8\Id. (footnote omitted).
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    c. The Commission believes that it is appropriate to restrict 
trading practices through SOES that impose excessive risks and costs 
on market makers and jeopardize market quality, and which do not 
provide significant contributions to liquidity or pricing 
efficiency. * * * The Commission believes that it is more important 
to ensure that investors seeking to establish or liquidate an 
inventory position have ready access to a liquid Nasdaq market and 
SOES than to protect the ability of customers to use SOES for intra-
day trading strategies.\9\

    \9\Id. at 69424-25.
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    d. The Commission believes that there are increased costs 
associated with active intra-day trading activity through SOES that 
undermine Nasdaq market quality * * * Active intra-day trading 
activity through SOES can also contribute to instability in the 
market. * * *\10\

    \10\Id. (footnote omitted).
    e. In addition, these waves of executions can make it difficult 
to maintain orderly markets. Given the increased volatility 
[[Page 9706]] associated with these waves of intra-day trading 
activity, market makers are subject to increased risks that 
concentrated waves of orders will cause the market to move away. As 
a result, individual market makers may be unwilling to narrow the 
current spread and commit additional capital to the market by 
raising the bid or lowering the offer. When market makers commit 
less capital and quote less competitive markets, prices can be 
expected to deteriorate more rapidly. Accordingly, the Commission 
believes that it is appropriate for the NASD to take measured steps 
to redress the economic incentives for frequent intra-day trading 
inherent in SOES to prevent SOES activity from having a negative 
effect on market prices and volatility.\11\

    \11\Id. at 69424-26 (footnote omitted).
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    f. The Commission does not believe that intra-day trading 
strategies through SOES contribute significantly to market 
efficiency in the sense of causing prices to reflect information 
more accurately.\12\

    \12\Id.
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    g. The Commission has evaluated each of the proposed 
modifications to SOES, and concludes that each of the modifications 
reduces the adverse effects of active trading through SOES and 
better enables market makers to manage risk while maintaining 
continuous participation in SOES. In addition, the Commission does 
not believe that any of the modifications will have a significant 
negative effect on market quality. To the extent that any of the 
modifications may result in a potential loss of liquidity for small 
investor orders, the Commission believes that these reductions are 
marginal and are outweighed by the benefits of preserving market 
maker participation in SOES and increasing the quality of executions 
for public and institutional orders as a result of the 
modifications.\13\

    \13\Id.
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    h. The Commission * * * has determined that the instant 
modifications to SOES further objectives of investor protection and 
fair and orderly markets, and that these goals, on balance, outweigh 
any marginal effects on liquidity for small retail orders, and any 
anti-competitive effects on order entry firms and their customers. 
The Commission concludes that the ability of active traders to place 
trades through a system designed for retail investors can impair 
market efficiency and jeopardize the level of market making capital 
devoted to Nasdaq issues. The Commission believes that the rule 
change is an appropriate response to active trading through SOES, 
and that the modifications will reduce the effects of concentrated 
intra-day SOES activity on the market.\14\

    \14\Id. at 69429.
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    The NASD believes these significant statutory findings by the SEC 
regarding the SOES Minimum Exposure Limit rule and the SOES Automated 
Quotation Update Feature and the SEC's assessment of the likely 
benefits to the marketplace that would result from the rules have been 
confirmed and substantiated by econometric studies on the effectiveness 
of the Interim SOES Rules conducted by the NASD's Economic Research 
Department\5\ and an independent economist commissioned by the 
NASD.\16\ When the SEC approved the Interim SOES Rules, it stated that 
``[a]ny further action the NASD seeks with respect to SOES--extension 
of these modifications upon expiration, or introduction of other 
changes--will require independent consideration under Section 19 of the 
Act.''\17\ In addition, the SEC stated that, should the NASD desire to 
extend these SOES changes or modify SOES, the Commission would expect, 
``the NASD to monitor the quality of its markets and assess the effects 
of the approved SOES changes on market quality for Nasdaq securities.'' 
Also, if feasible, the SEC instructed the NASD to provide a 
quantitative and statistical assessment of the effects of the SOES 
changes on market quality; or, if an assessment is not feasible, the 
SEC stated that the NASD should provide a reasoned explanation 
supporting that determination.

    \15\See letter from Gene Finn, Vice President & Chief Economist, 
NASD, to Katherine England, Assistant Director, National Market 
System & OTC Regulation, SEC, dated October 24, 1994 (letter 
submitted in connection with the NASD's NPROVE filing, SR-
NASD-94-13).
    \16\See The Association Between the Interim SOES Rules and 
Nasdaq Market Quality, Dean Furbush, Ph.D., Economists, Inc., 
Washington D.C., December 30, 1994 (``Furbush Study'').
    \17\Interim SOES Rules Approved Order, supra note 2, 59 FR at 
69429.
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    In sum, the NASD's study found that:
     Since the SOES changes went into effect in January 1994, 
the statistical evidence indicated that when average daily volume, 
stock price, and stock price volatility are held constant through 
regression techniques, quoted percentage spreads in Nasdaq securities 
experienced a decline in the immediate period following implementation 
of the changes and have continued to decline since then. The 
statistical evidence also showed that the narrowing of quoted 
percentage spreads became more pronounced and robust the longer the 
Interim SOES Rules were in effect. In particular, quoted spreads in 
cents per share for the 500 largest Nasdaq National Market securities 
experienced a sharp decline from April 28 to May 12 and from June 23 to 
July 18.\18\

    \18\Some press reports have attributed the recent decline in 
spreads for Nasdaq stocks to the publication, on May 26 and 27, 
1994, of newspaper articles in The Wall Street Journal, The Los 
Angeles Times and other publications reporting the results of an 
economic study conducted by two academicians that illustrated the 
lack of odd-eighth quotes for active Nasdaq stocks. Contrary to 
these press reports, this study shows that spreads had indeed 
narrowed before publication of these articles (from April 28 to May 
12), stabilized at these narrower levels from mid-May until June 23, 
and declined again from June 23 to July 18.
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     With the exception of a brief, market-wide period of 
volatility experienced by stocks traded on Nasdaq, the New York Stock 
Exchange, and the American Stock Exchange during the Spring, the 
volatility of Nasdaq securities appears to be unchanged in the period 
following implementation of the changes; and
     A smaller percentage of Nasdaq stocks experienced extreme 
relative price volatility after implementation of the rules and that 
these modifications, in turn, suggest a reduction in relative 
volatilities since the rules were put into effect.
    The Furbush Study also corroborated the findings of the NASD's 
study. This study found that there was a statistically significant 
improvement in effective spreads for the top 100 Nasdaq stocks (based 
on dollar volume) during the three month period following 
implementation of the rules. Moreover, the study also found that the 
most significant improvement in effective spreads for the top 100 
stocks occurred for trade sizes between 501 and 1,000 shares, precisely 
the level that was made ineligible for SOES trading by the Interim SOES 
Rules. In addition, the study found that the average number of market 
makers for the top ten Nasdaq-listed stocks increased from 44.3 to 
46.0, or 3.8 percent, and from 30.2 to 30.9 for the top 100 stocks, or 
2.3 percent. Although correlation does not necessarily imply causation, 
as noted by the SEC when it approved the Interim SOES Rules, the NASD 
believes that positive market developments clearly have been associated 
with implementation of the Interim SOES Rules.
    The NASD also believes that these studies of the effectiveness of 
the Interim SOES Rules lend credence to another NASD study that was 
submitted to the SEC in support of approval of the Interim SOES 
Rules.\19\ In the May 1993 SOES Study, the NASD found that concentrated 
waves of orders entered into SOES by active order-entry firms resulted 
in discernible degradation to the quality of the Nasdaq market. 
Specifically, the study found, among other things, that: (1) bursts of 
orders entered into SOES by active order entry firms frequently result 
in a decline in the bid price and a widening of the bid-ask spread; (2) 
there is a significant [[Page 9707]] positive relationship between 
increases in spreads and volume attributable to active order-entry 
firms as it related to total SOES volume per security; and (3) activity 
by active order-entry firms resulted in higher price volatility and 
less liquidity--higher price changes are associated with high active 
trading firm volume, even after controlling for normal price 
fluctuations.

    \19\See 1NASD Department of Economic Research: Impact of SOES 
Active Trading Firms on Nasdaq Market Quality (May 12, 1993) (``May 
1993 SOES Study''). See also Securities Exchange Act Release No. 
32313 (May 17, 1993), 58 FR 29647 (publication of the study for 
comment).
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    Therefore, in light of all the above-cited statutory findings made 
by the SEC when it approved the SOES Minimum Exposure Limit rule and 
the SOES Automated Quotation Update Feature, coupled with the NASD's 
findings that these rules, as well as the rest of the Interim SOES 
Rules, have been associated with positive market developments in terms 
of lower spreads on Nasdaq and less stocks with extreme relative price 
volatility, the NASD believes it would be consistent with the Act for 
the Commission to extend the effectiveness of the SOES Minimum Exposure 
Limit rule and the SOES Automated Quotation Update Feature for a six-
month period. In sum, the NASD believes its study and the Furbush Study 
affirm the validity and correctness of the SEC's prior statutory 
findings made in connection with the approval of these rules. Moreover, 
even if the Commission is unwilling to find positive significance in 
the NASD's statistical analyses, at the very least, these studies 
indicate that the market has not been harmed by implementation of these 
rules.
    In addition, even if the Commission concludes that the Interim SOES 
Rules have had no impact on market quality, the NASD believes the 
Commission's approval of New York Stock Exchange (``NYSE'') Rule 80A on 
a permanent basis illustrates that the Commission would still have a 
sufficient basis to approve an extension on the SOES Minimum Exposure 
Limit rule and the SOES Automated Quotation Update Feature for a six 
month period.\20\ When NYSE Rule 80A was proposed, the Commission 
received considerable adverse comment to the effect that there was no 
causal relationship between index arbitrage and market volatility and 
that activation of the rule during turbulent market conditions could 
have disastrous effects on related options and futures markets and 
actually exacerbate market volatility. Despite these comments, the 
commission approved the proposal on a one-year pilot basis noting that 
``the NYSE proposal represents a modest step, proposed on a pilot 
basis, to attempt to address the issue of market volatility.''\21\ 
After the one year pilot, the NYSE prepared a report that, in the SEC's 
words, found that the standard measures of NYSE market quality appear 
largely unaffected by Rule 80A. Specifically, the NYSE Report indicated 
that: (1) quotes on the NYSE did not widen after the 50 Dow Jones 
Industrial Average point trigger was reached; and (2) the imposition of 
Rule 80A did not have any negative effect on price continuity and depth 
in the market.\22\ In addition, in approving Rule 80A on a permanent 
basis, the SEC noted that the rule ``represents a modest but useful 
step by the NYSE to attempt to address the issue of market 
volatility.''\23\ that the rule ``has not been disruptive to the 
marketplace,''\24\ and that there was a ``lack of evidence of any 
harmful effects of Rule 80A.''\25\ In sum, the SEC discussion of the 
statutory basis for approval of NYSE Rule 80A focused in large part on 
the fact that Rule 80A did not have any adverse impacts on market 
quality on the NYSE and that, as a result, the NYSE should be given the 
latitude to take reasonable steps to address excessive volatility in 
its marketplace. Accordingly, the NASD believes the SEC should afford 
the NASD the same regulatory flexibility that it afforded the NYSE to 
implement rules reasonably designed to enhance the quality of Nasdaq 
and minimize the effects of potentially disruptive trading practices.

    \20\Rule 80A provides that when the Dow Jones Industrial Average 
declines or advances by 50 points or more, all index arbitrage 
orders to sell or buy must be executed in a market stabilizing 
manner.
    \21\See Securities Exchange Act Release No. 28282 (July 30, 
1990), 55 FR 31468, 31472 (Order approving File Nos. SR-NYSE-90-5 
and 90-11).
    \22\See Securities Exchange Act Release No. 29854 (Oct. 24, 
1991), 56 FR 55963 (Oct. 30, 1991) (order approving file SR-NYSE-91-
21) (``Rule 80A Approval Order'').
    \23\Id. 56 FR at 55967.
    \24\Id.
    \25\Id. 56 FR at 55967-68
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    The NASD believes that the proposed rule change is consistent with 
Sections 15A(b)(6), 15A(b)(9), 15A(b)(11) and 11A(a)(1)(C) of the Act. 
Among other things, Section 15A(b)(6) requires that the rules of a 
national securities association be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and in general to 
protect investors and the public interest. Specifically, the NYSE is 
proposing to extend the effectiveness of the SOES Minimum Exposure 
Limit rule and the SOES Automated Quotation Update Feature for six 
months because of concerns that concentrated, aggressive use of SOES by 
a growing number of order entry firms has resulted in increased 
volatility in quotations and transactions prices, wider spreads, and 
the loss of liquidity for individual and institutional investor orders, 
all to the detriment of public investors and the public interest. The 
NYSE believes the SOES Minimum Exposure Limit rule and the SOES 
Automated Quotation Update Feature have operated to rectify this 
situation while continuing to provide an effective opportunity for the 
prompt, reliable execution of small orders received from the investing 
public. Accordingly, in order to protect investors and the public 
interest, the NASD believes the Interim SOES Rules should be extended 
through October 2, 1995, so that small investors' orders will continue 
to receive the fair and efficient executions that SOES was designed to 
provide.
    Section 15A(b)(9) provides that the rules of the Association may 
not impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The SOES Minimum Exposure Limit 
rule and the SOES Automated Quotation Update Feature apply across the 
board and do not target any particular user or participant, as all 
dealers may set their exposure limits at two times the tier size and 
all dealers may elect to utilize the automated quote feature. 
Accordingly, the NASD believes that these rules changes are not anti-
competitive, as they are uniform in application and they seek to 
preserve the ability of SOES to provide fair and efficient automated 
executions for small investor orders, while preserving market maker 
participation in SOES and market liquidity.
    Section 15A(b)(11) empowers the NASD to adopt rules governing the 
form and content of quotations relating to securities in the Nasdaq 
market. Such rules must be designed to produce fair and informative 
quotations, prevent fictitious and misleading quotations, and promote 
orderly procedures for collecting and distributing quotations. The NASD 
is seeking to continue the effectiveness of the SOES Minimum Exposure 
Limit rule and the SOES Automated Quotation Update Feature so that SOES 
activity may not result in misleading quotations in the Nasdaq market. 
Market makers place quotes in the Nasdaq system and these quotes 
comprise the inside market and define the execution parameters of SOES. 
[[Page 9708]] When volatility in the SOES environment causes market 
makers to widen spreads or to change quotes in anticipation of waves of 
SOES orders, quotes in the Nasdaq market become more volatile and may 
be misleading to the investing public. Accordingly, absent continuation 
of the SOES Minimum Exposure Limit rule and the SOES Automated 
Quotation Update Feature, the quotations published by Nasdaq may not 
reflect the true market in a security and, as a result, there may be 
short-term volatility and loss of liquidity in Nasdaq securities, to 
the detriment of the investing public. Further, the continuation of the 
automated refresh feature will ensure that a market maker's quotation 
is updated after an exposure limit is exhausted. Uninterrupted use of 
this function will maintain continuous quotations in Nasdaq as market 
makers exhausting their exposure limits in SOES will not be subject to 
a `'closed quote'' condition or an unexcused withdrawal from the 
market.
    Finally, the NASD believes that the proposed rule change is 
consistent with significant national market system objectives contained 
in Section 11A(a)(1)(C) of the Act. This provision states it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure, among other things, 
(i) economically efficient execution of securities transactions; (ii) 
fair competition among brokers and dealers; and (iii) the practically 
of brokers executing investor orders in the best market. Specifically, 
the SOES Minimum Exposure Limit rule and the SOES Automated Quotation 
Update Feature advance each of these objectives by preserving the 
operational efficiencies of SOES for the processing of small investors' 
orders, by maintaining current levels of market maker participation 
through reduced financial exposure from unpreferenced orders, and by 
reducing price volatility and the widening of market makers' spreads in 
response to the practices of order entry firms active in SOES.
    In addition, for the same reasons provided by the SEC when it 
approved the Interim SOES Rules that are cited above in the text 
accompanying footnotes 7 through 14, the NASD believes that the 
proposed rule change is consistent with Sections 15A(b)(6), 15A(b)(9), 
15A(b)(11) and 11A(a)(1)(C) of the Act.

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

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

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

    Comments were neither solicited nor received.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the NASD consents, the Commission will:
    A. by order approve such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection for 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 File Number SR-NASD-95-8 and 
should be submitted by March 14, 1995.

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

    \26\17 CFR 200.30-3(a)(12) (1994)
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Margaret H. MacFarland,
Deputy Secretary.
[FR Doc. 95-4085 Filed 2-17-95; 8:45 am]
BILLING CODE 8010-01-M