Self-Regulatory Organizations; National Association of Securities Dealers, Inc. Notice of Filing and Order Granting Accelerated Temporary Approval of Proposed Rule Change Relating to the Quotation Linkage With the London Stock Exchange

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33946; International Series Release No. 659; File No.

SR-NASD-94-23]

Self-Regulatory Organizations; National Association of Securities

Dealers, Inc. Notice of Filing and Order Granting Accelerated Temporary

Approval of Proposed Rule Change Relating to the Quotation Linkage With

the London Stock Exchange

April 21, 1994.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''),\1\ notice is hereby given that on April 12, 1994, the

National Association of Securities Dealers, Inc. (``NASD'' or

``Association'') filed with the Securities and Exchange Commission

(``Commission'' or ``SEC'') the proposed rule change as described in

Items I and II below, which Items have been prepared by the NASD. 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) (1988).

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I. Self-Regulatory Organization's Statement of the Terms of Substance

of the Proposed Rule Change

On October 2, 1987, the Commission issued an order approving

operation of a market information linkage between the NASD and the

London Stock Exchange (``LSE'') (formerly, the International Stock

Exchange of the United Kingdom and the Republic of Ireland) for a pilot

term of two years.\2\ This experimental linkage supports an interchange

of quotation information (``linkage information'') on about 740

securities (``linkage securities''); of that total, each marketplace

has designated approximately half as its ``pilot group'' of linkage

securities. NASD and LSE members that function as market makers in one

or more of a subset of linkage securities that are quoted in both the

Nasdaq and LSE dealer systems (``common issues'') are entitled to

access linkage information without paying a separate charge to receive

it. Operation of the linkage in this fashion comports with the terms of

the Commission's October 1987 Order. Most recently, the Commission

authorized an extension of this pilot linkage through May 5, 1994, by

approving File No. SR-NASD-93-55.\3\

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\2\Securities Exchange Act Release No. 24979 (Oct. 2, 1987), 52

FR 37684 (Oct. 8, 1987) (the ``October 1987 Order'').

\3\Securities Exchange Act Release No. 33060 (Oct. 15, 1993), 58

FR 54616 (Oct. 22, 1993).

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Pursuant to Section 19(b)(1) of the Act and Rule 19b-4 thereunder,

the NASD hereby files this proposed rule change to obtain Commission

approval for continuation of the NASD/LSE pilot linkage through October

31, 1994.

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 it received on the proposed rule change. The

text of these statements may be examined at the places specified in

Item IV 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

The purpose of this rule filing is to obtain an extension of the

Commission's interim approval of the NASD/LSE linkage through October

31, 1994. Absent an extension, authorization for the linkage will

expire as of May 5, 1994.

For some time now, the sponsors of this linkage have considered

various possibilities for its future development in meeting the needs

of the international investment community. Both markets have also

launched major initiatives to migrate their core processing and

communications facilities to state-of-the-art technologies that will

yield operational efficiencies and enhanced capacity. In this

connection, the LSE has notified the NASD that the progression of the

LSE's technology migration will foreclose continued operation of the

NASD/LSE linkage after October 31, 1994. Accordingly, the NASD is

requesting that the Commission extend its interim approval of the NASD/

LSE linkage through October 31, 1994. The NASD does not anticipate

further extension beyond that date.

The NASD submits that the statutory basis for the NASD/LSE pilot

linkage and the requested extension thereof, are contained in Sections

11A(a)(1) (B) and (C) and 15A(b)(6) of the Act. Subsections (B) and (C)

of Section 11A(a)(1) set forth the Congressional goals of achieving

more efficient and effective market operations, the availability of

information with respect to quotations for securities and the execution

of investor orders in the best market through the application of new

data processing and communications techniques. Section 15A(b)(6)

requires, among other things, that the rules of the NASD be designed to

foster cooperation and coordination with persons engaged in regulating,

clearing, settling, processing information with respect to, and

facilitating transactions in securities, and to remove impediments to

and perfect the mechanism of a free and open market. The NASD believes

that the requested extension of the linkage's temporary authorization

is fully consistent with the policy goals reflected in these statutory

provisions.

B. Self-Regulatory Organization's Statement on Burden on Competition

In its original release announcing interim approval of the NASD/LSE

pilot linkage, the Commission referenced certain competitive concerns

raised by Instinet Corporation (``Instinet'') through counsel.\4\ In

response, the NASD, after consultation with the LSE, made a good faith

effort to address those concerns by narrowing the universe of firms and

terminals permitted access to linkage information at no cost. Those

changes were reflected in File No. SR-NASD-87-20, which the Commission

approved by issuing the October 1987 Order. With respect to File No.

SR-NASD-89-44 (which resulted in extension of the linkage's

authorization until December 1, 1990), the NASD also submitted

statistical and cost information relative to its participation in the

pilot project. Given that the NASD/LSE linkage will be terminated on or

shortly before October 31, 1994, the NASD believes that the instant

rule change will not result in any burden on competition that is not

necessary or appropriate in furtherance of the purposes of the Act.

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\4\See Securities Exchange Act Release No. 23158 (Apr. 21,

1986), 51 FR 15989 (Apr. 29, 1986). See also letter from Daniel T.

Brooks, Counsel for Instinet, to John Wheeler, Secretary, SEC (Apr.

16, 1986).

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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 NASD requested that the Commission find good cause for

approving this proposed rule change prior to the 30th day following

publication of notice of the filing in the Federal Register, and, in

any event, by May 5, 1994, the expiration of the linkage's present

authorization. The NASD believes that the requested extension of the

pilot period is fully consistent with the statutory provisions and

policy goals referenced in Section II of this Rule 19b-4 filing.

Moreover, the NASD argued the additional time will enable the

sponsoring markets to effect an orderly termination of this

experimental project. Under the circumstances, the Commission finds

that allowing the NASD/LSE linkage to cease abruptly would be

counterproductive.

The Commission finds that the proposed rule change is consistent

with the requirements of the Act and the rules and regulations

thereunder applicable to the NASD and, in particular, the requirements

of Sections 11A(a)(1) (B) and (C) and 15A(b)(6), and the rules and

regulations thereunder.

The Commission finds good cause for approving the proposed rule

change prior to the 30th day after the date of publication of notice of

filing thereof. Accelerated approval will avoid an unnecessary

interruption of the pilot linkage while allowing the NASD and LSE to

provide for an orderly termination of this experimental program in the

final quarter of 1994.\5\ Accordingly, under these circumstances, the

Commission believes the NASD/LSE linkage should be permitted to

continue operating, without a hiatus, for a brief period sufficient to

bridge the migration to new technologies being developed by the

sponsoring markets.

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\5\The NASD has represented that it will provide notice to its

subscribers of the termination of the NASD/LSE linkage in its

Subscriber Bulletin no later than August 30, 1994. Telephone

conversation between Michael Kulczak, Associate General Counsel,

NASD, with Michael Ryan, Attorney, SEC (Apr. 19, 1994).

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IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and

arguments concerning the foregoing. 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 the file number in the caption

above and should be submitted by May 19, 1994.

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,

that the proposed rule change be, and hereby is, approved for an

additional period, inclusive of October 31, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\6\

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\6\17 CFR 200.30-3(a)(12) (1993).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-10125 Filed 4-26-94; 8:45 am]

BILLING CODE 8010-01-M