[Federal Register Volume 64, Number 210 (Monday, November 1, 1999)]
[Notices]
[Pages 58875-58876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28458]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42057; File No. SR-NASD-99-64]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 to the 
Proposed Rule Change by the National Association of Securities Dealers, 
Inc., to Delay Implementation of 90-Second Trade Reporting as Part of a 
Pilot Program Extending the Availability of Certain Nasdaq Services and 
Facilities Until 6:30 P.M. Eastern Time

October 22, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),1 and Rule 19b-4 thereunder,2 notice is 
hereby given that on October 22, 1999, the National Association of 
Securities Dealers, Inc., (``NASD''), through its wholly-owned 
subsidiary, The Nasdaq Stock Market, Inc., (``Nasdaq'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by Nasdaq. Also on October 22, 1999, the NASD 
filed Amendment No. 1 to the proposed rule change.3 The 
Exchange filed the proposal pursuant to Section 19(b)(3)(A) of the 
Act,4 and Rule 19b-4(f)(6) thereunder,5 which 
renders the proposal effective upon filing with the Commission. 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).
    \2\ 17 CFR 240.19b-4.
    \3\ See October 22, 1999 letter from Thomas P. Moran, Assistant 
General Counsel, Nasdaq, to Belinda Blaine, Associate Director, 
Division of Market Regulation, SEC (``Amendment No. 1''). In 
Amendment No. 1, Nasdaq requested that the proposed rule change be 
filed under Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) 
thereunder. 15 U.S.C. 78s(b)(3)(A) and 17 CFR 240.19b-4(f)(6). 
Nasdaq also requested that the Commission waive the 5-day notice of 
its intent to file the proposal and the 30-day period before the 
proposal becomes operative pursuant to Rule 19b-4(f)(6). 17 CFR 
240.19b-4(f)(6).
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Nasdaq proposes to defer, until November 15, 1999, the imposition 
of 90-second trade reporting rules between the hours of 5:15 p.m. and 
6:30 p.m. Eastern Time that are part of a pilot program extending the 
availability of several Nasdaq services and facilities until 6:30 p.m. 
Eastern Time. This pilot was approved by the Commission6 and 
is set to commence on October 25, 1999. The text of the proposal is 
available upon request from the Office of the Secretary, the NASD, or 
the Commission.
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    \6\ See Securities Exchange Act Release No. 42003 (October 13, 
1999)(SR-NASD-99-57).
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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, Nasdaq included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments is 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

    On October 13, 1999, the Commission approved a pilot program 
expanding the operating hours of certain Nasdaq services and facilities 
until 6:30 p.m. Eastern Time.7 The pilot is set to commence 
on October 25, 1999, and will expand until 6:30 p.m. Eastern Time the 
operation times of the following services: (1) SelectNet Service 
(``SelectNet''); (2) Automated Confirmation Transaction Service 
(``ACT''); (3) Nasdaq Quotation Dissemination Service (``NQDS''); and 
(4) Nasdaq Trade Dissemination Service (``NTDS''). Subsequent to the 
Commission's approval of the pilot, Nasdaq and the Commission received 
numerous expressions of concern from NASD members regarding their 
ability to convert their internal automated systems in time to comply 
with the October 25, 1999 start of the pilot, and in particular with 
the imposition of new 90-second trade reporting obligations between the 
hours of 5:15 p.m. and 6:30 p.m. Eastern Time.
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    \7\ Id.
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    Upon review of these concerns, the determination was made to defer 
imposition of 90-second trade reporting until November 15, 1999 between 
the hours of 5:15 p.m. and 6:30 p.m. Eastern Time. All member firms are 
expected, however, to report trades as soon as possible after 
execution, and to the extent they are able to do so before November 15, 
1999, within 90 seconds. In addition, Nasdaq has requested that the 
Commission staff expand its previous grant of no-action relief 
concerning SEC Rules 11Ac1-1(c)(5),8 11Ac1-49 and 
301(b)(3) 10 to December 6, 1999, the date on which Nasdaq 
expects to be able to provide an inside quote. Pursuant to this relief, 
the NASD will likewise defer enforcement of NASD IM 2110-2 (Trading 
Ahead of Customer Limit Order) until December 6, 1999.
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    \8\ 17 CFR 240.11Ac1-1(c)(5).
    \9\ 17 CFR 240.11Ac1-4.
    \10\ 17 CFR 242.301(b)(3).
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    Finally, Nasdaq will soon amend SR-NASD-99-62, currently pending 
with the Commission, which seeks to mandate 90-second trade reporting 
is listed securities from 5:15 p.m. to 6:30 p.m., to seek a delay in 
imposing that obligation on NASD member firms until November 15, 1999, 
to allow firms additional time to modify their internal systems and 
make uniform the start date for 90-second trade reporting.
    These modifications will allow the expanded availability of 
Nasdaq's SelectNet/ACT/NQDS/NTDS systems and services to 6:30 p.m. 
Eastern Time to commence on October 25, 1999, as scheduled, while at 
the same time giving NASD member firms sufficient time to make internal 
systems changes.
    Nasdaq believes that the proposal will provide firms with a 
reasonable opportunity to enhance their internal systems prior to the 
November 15, 1999 start date of expanded 90-second trade reporting. 
Nasdaq believes this approach strikes a prudent balance between 
investors' need for enhanced quote and trade collection and 
dissemination after the regular close of the Nasdaq market and 
constraints faced by the industry with the implementation of system 
solutions to what would otherwise will be the manual processing of 
trades and trade reports.
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act11 in that it 
is designed to prevent fraudulent and manipulative acts and

[[Page 58876]]

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.
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    \11\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will 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

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not:
    (i) significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \12\ and 
Rule 19b-4(f)(6) thereunder.\13\ At any time within 60 days of the 
filing of the proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    Nasdaq has requested that the operative date be accelerated, and 
that the Commission waive the requirement that it provide written 
notice of its intent to file the proposed rule change more than five 
business days prior to the date of filing of the proposed rule change.
    The Commission finds that it is appropriate to designate the 
proposal to become operative today because such designation is 
consistent with the protection of investors and the public interest. 
Acceleration of the operative date of the proposed rule change will 
allow NASD members additional time to covert their internal automated 
system to comply with the imposition of new 90-second trade reporting 
obligations between the hours of 5:15 p.m. and 6:30 p.m. Eastern Time, 
and to make uniform the start date 90-second trade reporting. For these 
reasons, the Commission finds good cause to waive the requirement that 
Nasdaq provide written notice of its intent to file the proposed rule 
change prior to the date of filing the proposal, and to designate that 
the proposal become operative today.\14\
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    \14\ In reviewing this rule, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 87c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609. 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-99-64 and 
should be submitted November 22, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-28458 Filed 10-29-99; 8:45 am]
BILLING CODE 8010-01-M