[Federal Register Volume 60, Number 166 (Monday, August 28, 1995)]
[Notices]
[Pages 44532-44533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21274]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36129; File No. SR-NASD-95-27]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving Proposed Rule Change Relating to the 
Adjustment of Open Orders

August 22, 1995.

I. Introduction

    On February 3, 1995, the National Association of Securities 
Dealers, Inc. (``NASD'' or ``Association'') filed with the Securities 
and Exchange Commission (``SEC'' or ``Commission'') a proposed rule 
change pursuant to Section 19(b)(1) of the Securities 

[[Page 44533]]
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The 
NASD seeks to amend Article III, Section 46 of the Rules of Fair 
Practice to provide that where the issuer of a security declares a cash 
dividend or other distribution of less than one cent ($.01), members 
will not be required to adjust open orders for such securities.

    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ 17 CFR 240.19b-4 (1994).
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    Notice of the proposed rule change appeared in the Federal Register 
on June 28, 1995.\3\ No comments were received in response to the 
Commission release. This order approves the proposed rule change.

    \3\ Securities Exchange Act Release No. 35875 (June 21, 1995), 
60 FR 33442 (June 28, 1995).
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II. Description of the Proposed Rule Change

    Article III, Section 46 of the Rules of Fair Practice requires 
members holding open orders to proportionally reprice such orders 
according to the value of the dividend or distribution on the date the 
security is quoted ex-dividend, ex-rights, ex-distribution or ex-
interest. According to the NASD, shortly after the rule became 
effective in September 1994, several member firms questioned the 
necessity of complying with Section 46 if a dividend or other 
distribution was less than one cent ($.01).
    The NASD has determined that where a dividend or other distribution 
of less than one cent ($.01) has been declared, the costs associated 
with complying with Section 46 exceed the benefits. Specifically, the 
NASD concluded that the effect of such a small dividend or other 
distribution on the price of the security is de minimis and, therefore, 
the likelihood that unadjusted orders will result in poor executions 
for customers is remote. Accordingly, the NASD proposes to amend 
Section 46 to state that where a dividend or other distribution is less 
than one cent ($.01), the price of the order shall not be adjusted.

III. Discussion

    The Commission believes that the NASD's proposal is consistent with 
the requirements of the Act and the rules and regulations thereunder 
applicable to the NASD and, therefore, has determined to approve the 
rule change. Specifically, the Commission believes that the proposed 
rule change is consistent with the requirements of Section 15A(b)(6) 
\4\ of the Act in that it eliminates the costs and inefficiencies 
associated with mandating the repricing of orders where the dividend or 
distribution is less than one cent ($.01).

    \4\ 15 U.S.C. 78o-3(b)(6).
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IV. Conclusion

    For the reasons stated above, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change SR-NASD-95-27 be, and hereby is, 
approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\

    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Security.
[FR Doc. 95-21274 Filed 8-25-95; 8:45 am]
BILLING CODE 8010-01-M