[Federal Register Volume 64, Number 241 (Thursday, December 16, 1999)]
[Notices]
[Pages 70307-70309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32556]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42213; File No. SR-NASD-99-71]


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 Date of Commencement for Providing Nasdaq-Generated Best 
Bid/Offer Inside Quotation From 4:00 p.m. to 6:30 p.m. Eastern Time

December 9, 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 December 3, 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. On December 6, 1999, Nasdaq filed an amendment to the 
proposed rule change.\3\ Nasdaq has designated this proposal as one 
which does not significantly affect the protection of investors or the 
public interest, and does not impose any significant burden on 
competition under 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, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See December 6, 1999 letter from Thomas Moran, Esquire, 
Nasdaq, to Katherine A. England, Assistant Director, Division of 
Market Regulation, SEC (``Amendment No. 1''). In Amendment No. 1, 
Nasdaq states that it received a letter from the Investment Company 
Institute (``ICI'') in which the ICI indicated its support of a 
delay in the implementation of a Nasdaq-generated best bid/offer 
inside quotation (``Inside Quote'') until February 7, 2000.
    \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 February 7, 2000, the date by which 
Nasdaq will commence providing an Inside Quote. Nasdaq had originally 
proposed, and received Commission approval, to provide an Inside Quote 
commencing on December 6, 1999.

[[Page 70308]]

Nasdaq's commitment to provide an Inside Quote after the regular close 
of the Nasdaq market between the hours of 4:00 p.m. and 6:30 p.m. 
Eastern Time is part of a currently-operating pilot program extending 
the availability of several Nasdaq services and facilities until 6:30 
p.m. Eastern Time. That pilot was approved by the Commission,\6\ and 
commenced on October 25, 1999. Nasdaq has designated this proposal as 
non-controversial, and thus eligible for immediate effectiveness 
pursuant to section 19(b)(3)(A) of the Act \7\ and rule 19b-4(f)(6) 
thereunder.\8\ Nasdaq requests that the Commission waive both the 30-
day pre-operative waiting period and the five-day pre-filing notice 
requirement contained in rule 19b-4(f)(6)(iii).\9\
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    \6\ See Securities Exchange Act Release No. 42003 (October 13, 
1999), 64 FR 56554 (October 20, 1999) (NASD-SR-99-57).
    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 17 CFR 240.19b-4(f)(6)(iii).
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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 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

    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.\10\ The pilot commenced on October 25, 
1999, and expanded, 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'').
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    \19\ See Securities Exchange Act Release No. 42003 (October 13, 
1999), 64 FR 56554 (October 20, 1999) (NASD-SR-99-57).
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    Nasdaq and the Commission received expressions of concern from the 
mutual fund industry regarding its ability to modify its internal 
automated computer systems to calculate in a timely fashion the value 
of securities held in specific mutual funds if Nasdaq continued to 
update an Inside Quote after 4:00 p.m. Eastern Time. In response to 
these concerns, the NASD has decided to defer the implementation of an 
Inside Quote from its currently-scheduled start date of December 6, 
1999, to February 7, 2000.
    Nasdaq believes that such deferral will allow mutual fund firms a 
reasonable opportunity to enhance their internal systems prior to that 
date. Nasdaq also believes that such deferral strikes a balance between 
the investor's need for enhanced quote and trade collection and 
dissemination after the regular close of the Nasdaq market, and 
technological constraints faced by the mutual fund industry concerning 
its ability to price accurately the securities held in those funds.
    Nasdaq believes that the proposed rule change, as amended, is 
consistent with the provisions of Section 15A(b)(6) of the Act,\11\ in 
that it is 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.
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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

    No written comments were solicited. Nasdaq received one written 
comment on its proposal from the ICI, in which the ICI indicated its 
support of a delay in the implementation of an Inside Quote until 
February 7, 2000.

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

    The proposed rule change, as amended, has become effective pursuant 
to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) thereunder 
\13\ because the proposal (1) does not significantly affect the 
protection of investors or the public interest; (2) does not impose any 
significant burden on competition; and (3) does not become operative 
for 30 days after the date of filing or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, provided that Nasdaq has given the Commission 
written notice of its intent to file the proposed rule change at least 
five business days prior to the filing date of the proposed rule 
change, or such shorter time as designated by the Commission.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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    Nasdaq has requested that the Commission waive the five-day pre-
filing notice requirement contained in Rule 19b-4(f)(6)(iii),\15\ and 
accelerate the operative date.
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    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission finds that it is appropriate to waive the five-day 
pre-filing notice requirement, and to designate the proposal, as 
amended, to become operative today, because such designation is 
consistent with the protection of investors and the public interest. 
Specifically, the Commission believe that the proposal furthers the 
goals of the national market system as reflected in Sections 
11A(a)(1)(C) (iii) and (iv) of the Act.\16\ Congress found in those 
provisions that it is in the public interest and appropriate for the 
protection of investors and the maintenance of fair and orderly markets 
to assure the availability to brokers, dealers, and investors of 
information with respect to quotations for and transactions in 
securities, and to assure the practicability of brokers executing 
investors' orders in the best market. The proposal will help to assure 
the availability of information with respect to quotations and 
transactions because it will allow the mutual fund industry a 
reasonable amount of time to adjust its internal systems, thereby 
helping to ensure that the systems operate accurately, efficiently, and 
without disruption.
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    \16\ 15 U.S.C. 78k-1(a)(1)(C) (iii) and (iv).
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    The Commission also finds that the proposed rule change is 
consistent with Section 15A of the Act \17\ in general, and Section 
15A(b)(6) of the Act \18\ in particular, in that it is 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

[[Page 70309]]

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. The proposal accomplishes these objectives by allowing the 
mutual fund industry an opportunity to reconfigure its internal 
systems, thereby helping to ensure a seamless transition to a time when 
Nasdaq provides an Inside Quote from 4:00 p.m. until 6:30 p.m. Eastern 
Time.
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    \17\ 15 U.S.C. 78o-3.
    \18\ 15 U.S.C. 78o-3(b)(6).
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    For these reasons, the Commission finds that designation of the 
proposal to become operative today is consistent with the protection of 
investors and the public interest.
    At any time within 60 days of the filing of this proposed rule 
change, the Commission may summarily abrogate this rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest or for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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, NW, Washington, DC 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-99-71, and should be 
submitted by January 6, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-32556 Filed 12-15-99; 8:45 am]
BILLING CODE 8010-01-M