[Federal Register Volume 62, Number 95 (Friday, May 16, 1997)]
[Notices]
[Pages 27094-27095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12889]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38610; File No. SR-NASD-97-31]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc., 
Relating to an Amendment to the NASD's Rule Governing Market Maker 
Registration

May 12, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), and the National Association of 
Securities Dealers, Inc.'s (``NASD'' or ``Association'') Plan of 
Allocation and Delegation of Functions by NASD to Subsidiaries, notice 
is hereby given that on April 24, 1997, The Nasdaq Stock Market, Inc. 
(``Nasdaq'') 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 Nasdaq. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

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

    Nasdaq proposes to amend NASD Rule 4611(d) to permit managers and 
co-managers of an underwriting syndicate participating in a secondary 
offering of a security listed and traded on Nasdaq to register as a 
market maker in such issue on a same-day basis on the day of the 
secondary offering. (Additions are italicized; deletions are 
bracketed.)
* * * * *
NASD Rule 4611
    (a)-(c) No change.
    (d) A Nasdaq market maker may become registered in an issue already 
included in Nasdaq by entering a registration request via a Nasdaq 
terminal. If registration is requested in an issue that has been 
included in Nasdaq for more than five (5) days, and the requirements of 
paragraph (b) above are satisfied, registration shall become effective 
on the day after the registration request is entered. Provided, [If] 
however, that same day registration is permissible for:
    (1) a Nasdaq market maker, registered in a security that is the 
subject of a publicly announced merger or acquisition offer with 
another Nasdaq issue, who seeks registration in the other merger or 
acquisition issue; [, same-day registration is permissible.]; and

[[Page 27095]]

    (2) a manager or co-manager of an underwriting syndicate for a 
secondary offering of a security on the day of the secondary offering 
of that security.
    (e)-(g) No change.
* * * * *

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

    In its filing with the Commission, Nasdaq 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. Nasdaq 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

    NASD Rule 4611(d) provides that an NASD member may register as a 
Nasdaq market maker in an issue by entering a registration request 
``on-line'' via a Nasdaq terminal. For issues that have been trading on 
Nasdaq for more than five days, however, ``on-line'' registrations are 
not effective until the day after the registration request is made 
(``One-Day Delay Rule''). This one-day delay for market maker 
registration in non-IPOs is designed to minimize the potential for 
``fair weather'' market making. Specifically, the one-day delay helps 
to assure that members registering as market makers are making a 
legitimate commitment of their capital to the issue for the betterment 
of the market, not just to capture short-term trading profits during 
brief periods of favorable market conditions.
    While Nasdaq continues to believe that the one-day delay in market 
maker registration serves to minimize the potential for ``fair 
weather'' market makers, there have been instances where managers and 
co-managers of an underwriting syndicate for a secondary offering have 
been precluded from trading the issue on the day of the secondary 
offering because they did not submit a market maker registration 
request on the day before the offering. Accordingly, in light of the 
inherent commitment of managers and co-managers of underwriting 
syndicates to their issues, the need for these members to make a market 
in the stock to manager their risk, and the additional liquidity and 
pricing efficiency that these market makers can provide, Nasdaq is 
proposing to amend NASD Rule 4611(d) to permit managers and co-managers 
of a secondary offering to register in that issue on a same-day basis 
on the day of the secondary offering.
    Nasdaq believes the proposed rule change is consistent with Section 
15A(b)(6) of the Act. 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, by permitting 
managers and co-managers of secondary offerings to become registered 
market makers in such issues on the day of the secondary offering, 
Nasdaq believes the proposal will enhance the liquidity and stability 
of the market, facilitate greater market maker competition, and promote 
the capital formation process by enabling managers and co-managers of 
secondary offerings to better manage their risks associated with the 
offering. At the same time, given the inherent commitment of managers 
and co-managers to the stocks they underwrite, Nasdaq does not believe 
that permitting managers and co-managers of secondary offerings to 
register in such issues on a same-day basis on the day of the offering 
will compromise the regulatory purposes underlying the ``One-Day Delay 
Rule.''

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

    Nasdaq 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 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 number SR-NASD-97-31 and 
should be submitted by June 6, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority (17 CFR 200.30-3(a)(12) (1989)).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-12889 Filed 5-15-97; 8:45 am]
BILLING CODE 8010-01-M