[Federal Register Volume 60, Number 202 (Thursday, October 19, 1995)]
[Notices]
[Pages 54091-54093]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25927]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-36368; File No. S7-24-89]


Joint Industry Plan; Solicitation of Comments and Orders 
Approving Amendment No. 5 to Reporting Plan for Nasdaq/National Market 
Securities Traded on an Exchange on an Unlisted or Listed Basis, 
Submitted by the National Association of Securities Dealers, Inc., and 
the Boston, Chicago and Philadelphia Stock Exchanges

October 13, 1995.
    On October 12, 1995, the National Association of Securities 
Dealers, Inc., and the Boston, Chicago, and Philadelphia Stock 
Exchanges (collectively, ``Participants'') \1\ submitted to the 
Commission proposed Amendment No. 5 to a joint transaction reporting 
plan (``Plan'') for Nasdaq/National Market securities traded on an 
exchange on an unlisted or listed basis.\2\ 

[[Page 54092]]
The Commission is approving the proposed amendment to the Plan and 
trading pursuant to the Plan on a temporary basis to expire on November 
12, 1995.

    \1\ The signatories to the Plan, i.e., the National Association 
of Securities Dealers, Inc. (``NASD''), and the Chicago Stock 
Exchange, Inc. (``Chx'') (previously, the Midwest Stock Exchange, 
Inc.), Philadelphia Stock Exchange, Inc. (``Phlx''), and the Boston 
Stock Exchange, Inc. (``BSE''), are the ``Participants.'' The BSE, 
however, joined the Plan as a ``Limited Participant,'' and reports 
quotation information and transaction reports only in Nasdaq/
National Market (previously referred to as ``Nasdaq/NMS'') 
securities listed on the BSE. Originally, the American Stock 
Exchange, Inc., was a Participant to the Plan, but did not trade 
securities pursuant to the Plan, and withdrew from participation in 
the Plan in August 1994.
    \2\ The Commission notes that Section 12(f) of the Act describes 
the circumstances under which an exchange may trade a security that 
is not listed on the exchange, i.e., by extending unlisted trading 
privileges (``UTP'') to the security. Section 12(f) was amended on 
October 22, 1994, 15 U.S.C. 78l (1991) (as amended 1994). Prior to 
the amendment, Section 12(f) required exchanges to apply to the 
Commission before extending UTP to any security. In order to approve 
an exchange UTP application for a registered security not listed on 
any exchange (``OTC/UTP''), Section 12(f) required the Commission to 
determine that various criteria had been met concerning fair and 
orderly markets, the protection of investors, and certain national 
market initiatives. These requirements operated in conjunction with 
the Plan currently under review. The recent amendment to Section 
12(f), among other matters, removes the application requirement and 
permits OTC/UTP only pursuant to a Commission order or rule. The 
order or rule is to be issued or promulgated under essentially the 
same standards that previously applied to Commission review of UTP 
applications. The present order fulfills these Section 12(f) 
requirements.
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I. Background

    The Commission originally approved the Plan on June 26, 1990.\3\ 
The Plan governs the collection, consolidation and dissemination of 
quotation and transaction information for Nasdaq/National Market 
securities listed on an exchange or traded on an exchange pursuant UTP. 
The Commission originally approved trading pursuant to the Plan on a 
one-year pilot basis, with the pilot period to commence when 
transaction reporting pursuant to the Plan commenced. Consequently, the 
pilot period commenced on July 12, 1993. As requested by the 
Participants in Amendment Nos. 1, 2, 3, and 4 to the Plan, the 
Commission has extended the effectiveness of the Plan four times. 
Accordingly, the effectiveness of the Plan was scheduled to expire on 
October 12, 1995.\4\

    \3\ See Securities Exchange Act Release No. 28146 (June 26, 
1990), 55 FR 27917 (``1990 Approval Order''). For a detailed 
discussion of the history of UTP in OTC securities, and the events 
that led to the present plan and pilot program, see 1994 Extension 
Order, infra note 4.
    \4\ See Securities Exchange Act Release No. 34371 (July 13, 
1994), 59 FR 37103 (``1994 Extension Order''). See also Securities 
Exchange Act Release No. 35221, (January 11, 1995), 60 FR 3886 
(``January 1995 Extension Order''), Securities Exchange Act Release 
No. 36102 (August 14, 1995), 60 FR 43626 (``August 1995 Extension 
Order''), and Securities Exchange Act Release No. 36226 (September 
13, 1995), 60 FR 49029 (``September 1995 Extension Order'').
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    As originally approved by the Commission, the Plan required the 
Participants to complete their negotiations regarding revenue sharing 
during the one-year pilot period. The January 1995 Extension Order 
approved the effectiveness of the Plan through August 12, 1995, and 
since that time the Commission has expected the Participants to 
conclude their financial negotiations promptly (at that time, before 
January 31, 1995), and to submit a filing to the Commission that 
reflected the results of the negotiations.\5\ To date, the Participants 
have not completed their financial negotiations.

    \5\ See January 1995 Extension Order, id, at n. 6.
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    Proposed Amendment No. 5 to the Plan would extend the effectiveness 
and the negotiation period for an additional month through November 12, 
1995. The Commission believes it is appropriate to extend the 
effectiveness of the pilot program for an additional month in order to 
continue the pilot program in place while the Commission awaits the 
Participants' filing of a proposed Plan amendment concerning revenue 
sharing pursuant to the Plan.\6\

    \6\ The NASD, in its letter attached to the present filing, 
states that all Plan Participants have made a good faith effort to 
reach a final agreement on revenue sharing under the Plan, but that 
the Chx has requested a limited amount of time to conclude 
internally its consideration of the most recent draft of the 
financial plan amendment. See letter from Robert E. Aber, NASD, to 
Jonathan Katz, Commission, dated October 11, 1995. The Participants 
are reminded that they currently are in violation of the 
Commission's August 1995 Extension Order that required the 
Participants to submit a filing concerning revenue sharing on or 
before August 31, 1995. The Commission continues to urge the 
Participants to comply with the Commission's request for the filing 
promptly.
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II. Extension of Certain Exemptive Relief

    In conjunction with the Plan, on a temporary basis scheduled to 
expire on October 12, 1995, the Commission granted an exemption from 
Rule 11Ac1-2 under the Act regarding the calculated best bid and offer 
(``BBO''), and granted the BSE an exemption from the provision of Rule 
11Aa3-1 under the Act that requires transaction reporting plans to 
include market identifiers for transaction reports and last sale data. 
At the request of the Participants, this order extends these exemptions 
through November 12, 1995, provided that the Plan continues in effect 
through that date pursuant to a Commission order.\7\ The Commission 
continues to believe that exemptive relief from these provisions is 
appropriate through November 12, 1995.

    \7\ In the September 1995 Extension Order, the Commission 
extended these exemptions from September 12, 1995, through October 
12, 1995. Pursuant to a request made by the NASD, this order further 
extends the effectiveness of the relevant exemptions from October 
12, 1995, through November 12, 1995. See letter dated October 11, 
1995, id.
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III. Comments on the Operation of the Plan

    In the January 1995 Extension Order, the August 1995 Extension 
Order, and the September 1995 Extension Order, the Commission 
solicited, among other things, comment on: (1) Whether the BBO 
calculation for the relevant securities should be based on price and 
time only (as currently is the case) or if the calculation should 
include size of the quoted bid or offer; and (2) whether there is a 
need for an intermarket linkage for order routing and execution and an 
accompanying trade-through rule. The Commission continues to solicit 
comment on these matters.

IV. Solicitation of Comment

    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 and copying at the 
Commission's Public Reference Room. All submissions should refer to 
File No. S7-24-89 and should be submitted by November 9, 1995.

V. Conclusion

    The Commission finds that proposed Amendment No. 5 to the Plan to 
extend the operation of the Plan and the financial negotiation period 
for an additional month is appropriate and in furtherance of Section 
11A of the Act. The Commission finds further that extensions of the 
exemptive relief requested through November 12, 1995, as described 
above, also is consistent with the Act and the Rules thereunder. 
Specifically, the Commission believes that these extensions should 
serve to provide the Participants with more time to conclude their 
financial negotiations and with more information to evaluate the 
effects of and proposed course of action for the pilot program. This, 
in turn, should further the objects of the Act in general, and 
specifically those set forth in Sections 12(f) and 11A of the Act and 
in Rules 11Aa3-1 and 11Aa3-2 thereunder.
    It is therefore ordered, pursuant to Sections 12(f) and 11A of the 
Act and (c)(2) of Rule 11Aa3-2 thereunder, that Amendment No. 5 to the 
Joint Transaction Reporting Plan for Nasdaq/National Market securities 
traded on an exchange on an unlisted or listed basis is hereby 
approved, and trading 

[[Page 54093]]
pursuant to the Plan is hereby approved on a temporary basis through 
November 12, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority, 17 CFR 200.30-3(a)(29).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-25927 Filed 10-18-95; 8:45 am]
BILLING CODE 8010-01-M