[Federal Register Volume 59, Number 8 (Wednesday, January 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-742]
[[Page Unknown]]
[Federal Register: January 12, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33433; File No. SR-NASD-93-56]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Approving Proposed Rule Change Relating to the
Codification of Basic Requirements Respecting Access to and Use of the
OTC Bulletin Board Service
January 5, 1994.
On October 12, 1993, the National Association of Securities
Dealers, Inc. (``NASD'' or ``Association'') filed with the Securities
and Exchange Commission (``SEC'' or ``Commission'') a proposed rule
change pursuant to section 19(b)(1) of the Securities Exchange Act of
1934 (``Act'')\1\ and Rule 19b-4 thereunder.\2\ The proposal codifies
the existing requirements respecting access to and use of the OTC
Bulletin Board Service (``OTCBB'').
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1992).
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Notice of the proposed rule change, together with its terms of
substance, appeared in the Federal Register on October 21, 1993.\3\ No
comments were received on the proposal. This order approves the rule
change.
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\3\Securities Exchange Act Release No. 33052 (October 15, 1993),
58 FR 54389 (October 21, 1993).
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I. Description
The proposal codifies, without substantive change, various
requirements that the NASD has implemented, pursuant to Commission
approval, since the OTCBB was launched as a pilot program on June 1,
1990. Specifically, these requirements are included in the following
Rule 19b-4 NASD filings approved by the Commission: (1) File No. SR-
NASD-88-19 (as amended), detailing the basic operational requirements
for the OTCBB;\4\ (2) File No. SR-NASD-90-37, expanding by one-half
hour the quotation-update period applicable to market makers in
foreign/ADR issues;\5\ (3) File No. SR-NASD-91-12, establishing a firm
quote requirement for all priced bids/offers in domestic equity
securities; and (4) File No. SR-NASD-91-38, establishing the parameters
for an inside bid-ask calculation.\6\ Additionally, the codification
references two recently approved regulatory initiatives affecting the
OTCBB and participating member firms: (1) File No. SR-NASD-92-48,
concerning real-time trade reporting requirements for OTC equity
securities;\7\ and (2) File No. SR-NASD-93-17, revising the minimum
quotation size requirements for OTCBB market makers.\8\ The present
proposal provides that these initiatives will be published,
respectively, in Part XIII of Schedule D to the NASD By-Laws and
Section 5 of Schedule H to the NASD By-Laws.
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\4\Securities Exchange Act Release No. 27975 (May 30, 1990), 55
FR 23161 (June 6, 1990).
\5\Securities Exchange Act Release No. 28404 (August 31, 1990),
55 FR 37791 (September 3, 1990). The codification provides that,
with respect to a priced bid and/or offer entered into OTCBB for a
foreign equity security or an ADR, a market maker may update
quotation entries twice daily (once between 8:30 a.m. and 9:30 a.m.
ET, and once between noon and 21:30 p.m. ET).
\6\For any equity security quoted in the OTCBB, an inside bid-
ask calculation (i.e., the highest bid and lowest offer being
displayed by market makers registered in a particular security) is
available only if the security has at least two registered market
makers, each displaying a priced bid and offer. If additional market
makers are displaying either one or two-sided quotations, those
entries also are factored into the inside calculation. On the other
hand, if the basic requirement of two market makers is not
satisfied, an indication is generated denoting that no inside
calculation is available.
\7\Securities Exchange Act Release No. 32647 (July 16, 1993), 58
FR 39262 (July 22, 1993). The NASD has announced that real-time
trade reporting requirements for OTC equity securities would begin
on December 20, 1993.
\8\Securities Exchange Act Release No. 32570 (July 1, 1993), 58
FR 36725 (July 8, 1993). File No. SR-NASD-93-17, approved by the
Commission, replaced the previous 100-share minimum quote size
requirement for OTCBB with a tiered structure for mandatory minimum
quote size based on the price of the bid or offer.
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II. Discussion
The Commission believes that the proposed rule change is consistent
with sections 15A(b) (6) and (11) of the Act. Section 15A(b)(6)
requires, in pertinent part, that NASD rules be designed to prevent
fraudulent and manipulative acts or 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, and in general to protect investors and the public
interest. Section 15A(b)(11) requires that the rules of the NASD
include provisions governing the form and content of quotations
relating to securities sold otherwise than on a national securities
exchange and that those rules, among other things, be designed to
promote orderly procedures for collecting, distributing, and publishing
quotations.
The Commission believes that, because the proposal embodies
existing operational requirements that have been in place but, until
now, have not been codified as NASD rules, the proposal should
facilitate NASD members' efforts to research pertinent requirements by
referencing a discrete section of the NASD Manual. Thus, the
codification should facilitate members' ability to comply with the
requirements since they will be in a readily accessible form. Moreover,
the codification should promote orderly procedures for collecting,
distributing, and publishing OTCBB quotations since those procedures
now will be found in the NASD Manual. In sum, the Commission believes
the proposed codification should facilitate the NASD's administration
of and member firms' compliance with the operational requirements that
are unique to the OTCBB, thereby furthering the purposes of sections
15A(b) (6) and (11) and the Act in general.
It is therefore ordered, Pursuant to section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-NASD-93-56) is approved.
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\9\15 U.S.C. 78s(b)(2) (1988).
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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) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-742 Filed 1-11-94; 8:45 am]
BILLING CODE 8010-01-M