[Federal Register Volume 64, Number 242 (Friday, December 17, 1999)]
[Notices]
[Pages 70753-70754]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32712]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42219; File No. SR-NASD-98-26]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval to Amendment No. 8 to a Proposed Rule
Change by the National Association of Securities Dealers, Inc. to
Institute, on a Pilot Basis, New Primary Nasdaq Market Maker Standards
for Nasdaq National Market Securities
Dated: December 9, 1999.
On December 6, 1999, the National Association of Securities
Dealers, Inc. (``NASD'' or ``Association''), through its wholly-owned
subsidiary, the Nasdaq Stock Market, Inc. (``Nasdaq''), submitted to
the Securities and Exchange Commission (``SEC'' or ``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to:
(1) Continue to suspend the current PMM standards until September 30,
2000; and (2) extend the NASD's Short Sale Rule pilot until September
30, 2000 (``Amendment No. 8'').\3\ Amendment No. 8 to the proposed rule
change, SR-NASD-96-28, is described in Items I and II below, which
Items have been prepared by the NASD. The Commission is publishing this
notice and order to solicit comments on Amendment No. 8 from interested
persons and to approve the amendment on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Robert E. Aber, Senior Vice President and
General Counsel, Nasdaq, to Richard Strasser, Assistant Director,
Division of Market Regulation, Commission, dated November 18, 1999.
The current suspension and extension would expire on December 31,
1999. See Exchange Act Release No. 41568 (June 28, 1999), 64 FR
36416 (July 6, 1999).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
In the current amendment, Nasdaq is proposing to extend the Short
Sale Rule pilot and the suspension of existing PMM standards to allow
more time to refine the PMM standards. The proposed rule language, as
amended, follows. Additions are italicized; deletions are bracketed.
NASD Rule 3350
(a)-(k) No Changes
(l) This Rule shall be in effect until [December 31, 1999]
September 30, 2000.
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 received on the proposed rule change. The text
of these statements may be examined at the places specified in Item III
below. The NASD 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
Presently, NASD Rule 4612 provides that a member registered as a
Nasdaq market maker pursuant to NASD Rule 4611 may be deemed a PMM if
that member meets certain threshold standards. The implementation of
the SEC Order Handling Rules and what some perceive as a concurrent
move toward a more order-driven, rather than a quote-driven, market
raised questions about the continued relevance of those PMM standards.
As a result, the PMM standards were suspended beginning in early
1997.\4\ Currently, all market makers are designated as PMMs.
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\4\ See Exchange Act Release Nos. 38294 (February 14, 1997), 62
FR 8289 (February 24, 1997) (approving temporary suspension of PMM
standards); 39198 (October 3, 1997), 62 FR 53365 (October 14, 1997)
(extending suspension through April 1, 1998); 39819 (March 30,
1998), 63 FR 16841 (April 6, 1998) (extending suspension through May
1, 1998); 39936 (April 30, 1998), 63 FR 25253 (May 7, 1998)
(extending suspension through July 1, 1998); 40140 (June 26, 1998),
63 FR 36464 (July 6, 1998) (extending suspension through October 1,
1998); 40485 (September 25, 1998), 63 FR 52780 (October 1, 1998)
(extending suspension through March 31, 1999); 41195 (March 19,
1999), 64 FR 14778 (March 26, 1999) (extending suspension through
June 30, 1999); and 41568 (June 28, 1999), 64 FR 36416 (July 6,
1999) (extending suspension through December 31, 1999).
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Since February 1997, Nasdaq has worked to develop PMM standards
that are more meaningful in what may be an increasingly order-driven
environment, and that better identify firms engaged in responsible
market making activities deserving of the benefits associated with
being a PMM, such as being exempt from NASD Rule 3350, the NASD's Short
Sale Rule.
In light of a substantial number of comments on the proposed new
PMM standards, Nasdaq staff is August 1998 convened a subcommittee to
develop new standards. Nasdaq expects that it will file an amendment to
SR-NASD-98-26 to incorporate the new PMM standards that are currently
being developed by the subcommittee or, in the alternative, that it
will withdraw SR-NASD-98-26 and submit the new PMM standards as a new
filing. In the interim, the NASD now proposes to extend the current
suspension of the existing PMM standards and extend the Short Sale Rule
pilot.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 8, including whether the proposed
Amendment 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 No.
[[Page 70754]]
SR-NASD-98-26 and should be submitted by January 7, 2000.
IV. Commission's findings and Order Granting Accelerated Approval
of the Amendment
After careful consideration, the commission finds, for the reasons
set forth below, that the extension of the Short Sale Rule pilot and
the suspension of the existing PMM standards until September 30, 2000,
is consistent with the requirements of the Act and the rules and
regulations thereunder. In particular, the extension is consistent with
section 15A(b)(6)\5\ of the Act, which requires that NASD's rules be
designed, among other things, to remove impediments to and perfect the
mechanism of a free and open market and a national market system and to
promote just and equitable principles of trade.
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\5\ 15 U.S.C. 78o-3(b)(6).
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The Commission finds that continuation of the Short Sale Rule pilot
and the continued suspension of the current PMM standards will maintain
the status quo while the NASD develops revised PMM standards. Because
the Commission's ultimate stance on the Short Sale Rule may be
affected, in part, by the operation of revised PPM standards, it is
reasonable to keep the Short Sale Rule pilot in place while work
continues on the PMM standards. Furthermore, it is judicious, in the
short term, to avoid reintroducing the previous PMM standards prior to
implementing new PMM standards.
The Commission finds good cause for approving the extension of the
Short Sale Rule pilot and the suspension of existing PMM standards
prior to the 30th day after the date of publication of notice of the
filing in the Federal Register. It could be disruptive to the Nasdaq
market and confusing to market participants to reintroduce the previous
PMM standards for a brief period prior to implementing a new PMM pilot.
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\6\ that Amendment No. 8 to the proposed rule change, SR-NASD-98-
26, which extends the NASD Short Sale Rule pilot and the suspension of
the current PMM standards to September 30, 2000, is approved on an
accelerated basis.\7\
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\6\ 15 U.S.C. 78s(b)(2).
\7\ In approving Amendment No. 8, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
For the Commission, by the division of market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-32712 Filed 12-16-99; 8:45 am]
BILLING CODE 8010-01-M