[Federal Register Volume 62, Number 54 (Thursday, March 20, 1997)]
[Notices]
[Pages 13416-13417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7048]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38402; File No. SR-NASD-97-19]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by National Association of
Securities Dealers, Inc. Relating to Small Order Execution System Tier
Size Classifications
March 14, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given that
on March 7, 1997, 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 is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1)(1988).
\1\ 17 CFR 240.19b-4 (1991).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NASD is submitting this filing to effectuate The Nasdaq Stock
Market, Inc.'s (``Nasdaq'') periodic reclassification of Nasdaq
National Market (``NNM'') securities into appropriate tier sizes for
purposes of determining the maximum size order for a particular
security eligible for execution through Nasdaq's Small Order Execution
System (``SOES''). Specifically, under the proposal, 692 NNM securities
will be reclassified into a different SOES tier size effective April 1,
1997. Since the NASD's proposal is an interpretation of existing NASD
rules, there are no language changes.
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.
[[Page 13417]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the rule change is to effectuate Nasdaq's periodic
reclassification of NNM securities into appropriate tier sizes for
purposes of determining the maximum size order for a particular
security eligible for execution through SOES. Nasdaq periodically
reviews the SOES tier size applicable to each NNM security to determine
if the trading characteristics of the issue have changed so as to
warrant a tier size adjustment. Such a review was conducted using data
as of December 31, 1996, pursuant to the following established
criteria: \3\
\3\ The classification criteria is set forth in NASD Rule
4613(a)(2) and the footnote to NASD Rule 4710(g).
NNM securities with an average daily non-block volume of 3,000
shares or more a day, a bid price less than or equal to $100, and
three or more market makers are subject to a minimum quotation size
requirement of 1,000 shares and a maximum SOES order size of 1,000
shares;
NNM securities with an average daily non-block volume of 1,000
shares or more a day, a bid price less than or equal to $150, and
two or more market makers are subject to a minimum quotation size
requirement of 500 shares and a maximum SOES order size of 500
shares; and
NNM securities with an average daily non-block volume of less
than 1,000 shares a day, a bid price less than or equal to $250, and
less than two market makers are subject to a minimum quotation size
requirement of 200 shares and a maximum SOES order size of 200
shares.
Pursuant to the application of this classification criteria, 692
NNM securities will be reclassified effective April 1, 1997. These 692
NNM securities are set out in the NASD's Notice To Members 97-17.\4\
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\4\ NASD To Members 97-17 (March 1997).
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In ranking NNM securities pursuant to the established
classification criteria, Nasdaq followed the changes dictated by the
criteria with three exceptions. First, an issue was not moved more than
one tier size level. For example, if an issue was previously
categorized in the 1,000-share tier size, it would not be permitted to
move to the 200-share tier even if the reclassification criteria showed
that such a move was warranted. In adopting this policy, Nasdaq was
attempting to maintain adequate public investor access to the market
for issues in which the tier size level decreased and help ensure the
ongoing participation of market makers in SOES for issues in which the
tier size level increased. Second, for securities priced below $1 where
the reranking called for a reduction in tier size, the tier size was
not reduced. Third, for the top 50 Nasdaq securities based on market
capitalization, the SOES tier sizes were not reduced regardless of
whether the reranking called for a tier-size reduction.
The NASD believes that the proposed rule change is consistent with
Section 15A(b)(6) of the Act.\5\ Section 15A(b)(6) \6\ requires, among
other things, that the rules of the NASD governing the operation of
Nasdaq be designed to foster cooperation and coordination with persons
engaged in regulating, clearing, settling, processing information with
respect to, and facilitating transactions in securities, and to remove
impediments to and perfect the mechanism of a free and open market. The
NASD believes that the reassignment of NNM securities within SOES tier
size levels will further these ends by providing an efficient mechanism
for small, retail investors to execute their orders on Nasdaq and by
providing investors with the assurance that they can effect trades up
to a certain size at the best prices quoted on Nasdaq.
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\5\ 15 U.S.C. 78o(b)(6).
\6\ Id.
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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
The proposed rule change has become effective immediately on March
7, 1997, pursuant to Section 19(b)(3)(A)(i) of the Act \7\ and
subparagraph (e) of Rule 19b-4 \8\ thereunder, because the reranking of
NNM securities into appropriate SOES tier sizes was done pursuant to
the NASD's stated policy and practice with respect to the
administrative and enforcement of two existing NASD rules. Further, in
the SOES Tier Size Order, the Commission requested that the NASD
provide this information as an interpretation of an existing NASD rule
under Section 19(b)(3)(A) of the Act.\9\
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\7\ 15 U.S.C. 78s(b)(3)(A)(i).
\8\ 17 CFR 240.19b-4(e).
\9\ 15 U.S.C. 78s(b)(3)(A).
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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 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 File No. SR-NASD-97-19 and should
be submitted by April 10, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 97-7048 Filed 3-19-97; 8:45 am]
BILLING CODE 8010-01-M