Self-Regulatory Organizations; Notice and Immediate Effectiveness of Proposed Rule Change by the National Association of Securities Dealers, Inc. Relating to Initial Quotations of Initial Public Offerings

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34254]

Self-Regulatory Organizations; Notice and Immediate Effectiveness

of Proposed Rule Change by the National Association of Securities

Dealers, Inc. Relating to Initial Quotations of Initial Public

Offerings

June 24, 1994.

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

(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on June 15,

1994 the National Association of Securities Dealers, Inc. (``NASD'' or

``Association'') 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 the NASD.

The Commission is publishing this notice to solicit comments on the

proposed rule change from interested persons.

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

of the Proposed Rule Change

The NASD is proposing to implement a change to its existing

practice and procedures regarding quotations and the commencement of

trading in Nasdaq securities newly listed after an initial public

offering (``IPO'') that permit a five minute quotation-only time period

prior to the commencement of trading in the IPO.

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 NASD is proposing to change the current policies and practices

by which initial quoting and trading of new issues are conducted in The

Nasdaq Stock Market. Under the proposed change, when an IPO is first

authorized for inclusion in the Nasdaq Stock Market, the system will

display the time of day when quoting in the issue may begin and a time

of day when trading in that issue may begin. Specifically, when a new

security is released for trading, the window for quotations has been

set to allow market makers a period of five minutes to enter and adjust

their quotations prior to the commencement of trading. This quotation

period should assist the market makers in determining the appropriate

opening price. Currently, when an IPO is authorized for trading on

Nasdaq, market makers are permitted to immediately and simultaneously

enter quotations and trade on the subject security.

The proposed quotation-only period for IPOs is similar to the

display of quotations that occurs prior to the opening of the Nasdaq

Stock market. As with the pre-opening quotation period that occurs

daily in the Nasdaq Stock Market, the proposed quotation-only period

should provide market makers with the opportunity to adjust their

quotations and to present a better quotation when the market opens for

trading. Because it may be difficult at times to accurately gauge

interest in an IPO, quotes and trades in the IPO may be subject to

excessive volatility. This ``IPO Quote Window'' should permit a more

orderly market to develop prior to its release for actual trading.

The NASD believes that the proposed rule change is consistent with

the provisions of Section 15A(b)(6) of the Act, which requires, among

other things, that the rules of the Association remove impediments to

and perfect the mechanism of a free and open market and a national

market system, and Section 15A(b)(11), which provides that the rules of

the Association relating to quotations should be designed to produce

fair and informative quotations, to prevent fictitious or misleading

quotations, and to promote orderly procedures for collecting,

distributing, and publishing quotations.

(B) Self-Regulatory Organization's Statement on Burden on Competition

The NASD 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, as amended.

(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 effective pursuant to Section

19(b)(3)(A) of the Act and subparagraph (e) of Rule 19B-4 thereunder

because the proposal constitutes a change to its stated practices

regarding the administration and operation of existing quotation rules.

At any time within 60 days of the filing 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.

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, N.W., Washington, D.C. 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 July 21, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\1\

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\1\17 CFR 200.30-3(a)(12).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-15933 Filed 6-29-94; 8:45 am]

BILLING CODE 8010-01-M