[Federal Register: February 9, 1999 (Volume 64, Number 26)] [Notices] [Page 6415-6416] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr09fe99-134] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-41015; File No. SR-NASD-99-03] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the National Association of Securities Dealers, Inc. To Eliminate the Aggregation Presumption for SOES Orders Entered Within Five Minutes of Each Other February 3, 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 January 14, 1999, the National Association of Securities Dealers, Inc. (``NASD'' or ``Association'') through its wholly owned subsidiary the Nasdaq Stock Market, Inc. (``Nasdaq'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by Nasdaq. Nasdaq has designated this proposal as one constituting a stated policy, practice, or interpretation with respect to the meaning, administration or enforcement of an existing rule to take effect upon filing with the Commission pursuant to Section 19(b)(3)(A)(i) of the Act,\3\ and Rule 19b-4(e)(1) \4\ promulgated thereunder, which renders the rule effective upon the Commission's receipt of this filing. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ 15 U.S.C. 78s(b)(3)(A)(i). \4\ 17 CFR 240.19b-4(e)(1). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would eliminate the single investment decision aggregation presumption for Small Order Execution System (``SOES'') orders entered for accounts under the control of an associated person or public customer within five minutes of each other. This presumption is discussed in NASD Notice To Members (``NTM'') 88- 61. 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 Nasdaq is proposing to eliminate the presumption, contained in NASD NTM 88-61, that any two or more orders entered into Nasdaq's SOES system within any five minute period are part of a single investment decision and thus subject to aggregation for purposes of determining if the order as a whole violates the prohibition on the entry or orders in excess of the maximum SOES tier size assigned to a particular security. While eliminating the single investment decision presumption, NTM 88- 61's interpretation concerning what constitutes an order from a public customer will remain in effect. The proposal responds to recent Nasdaq rule changes that now allow market makers to display the actual size of their trading interest rather than a required minimum size. Nasdaq believes that the removal of these artificial mandatory minimum quote increments, and the resulting increased ability of market makers to manage their exposure to automatic order execution, reduces the concerns about inappropriate splitting of orders too large for SOES into smaller, SOES-eligible amounts that served as the basis for the establishment of the aggregation presumption. Nasdaq notes that the prohibition on splitting up larger orders to obtain SOES access contained in NASD Rule 4730(c)(3) remains in effect and, if violated, may still serve as the basis for disciplinary action by NASD Regulation, Inc. Based on the above, Nasdaq believes that the proposed rule change is consistent with the provisions of section 15A(b)(6) of the Act \5\ in that the proposal is designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, and to facilitate transactions in securities. --------------------------------------------------------------------------- \5\ 15 U.S.C. 78o-3(b)(6). --------------------------------------------------------------------------- (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 The foregoing rule change has become immediately effective pursuant to Section 19(b)(3)(A)(i) of the Act,\6\ and Rule 19b-4(e)(1) \7\ thereunder, in that it constitutes a stated policy, practice, or interpretation with respect to the meaning, administration or enforcement of an existing rule. At any time within 60 days of the filing of a rule change pursuant to Section 19(b)(3)(A) of the Act,\8\ the Commission may summarily abrogate the 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. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78s(b)(3)(A)(i). \7\ 17 CFR 249.19b-4(e)(1). \8\ 15 U.S.C. 78s(b)(3)(A). --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views, and [[Page 6416]] arguments concerning the foregoing, including whether the proposed rule change 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. 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 SR-NASD-99-03 and should be submitted by March 2, 1999. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\9\ --------------------------------------------------------------------------- \9\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 99-3100 Filed 2-8-99; 8:45 am] BILLING CODE 8010-01-M