Self-Regulatory Organizations; Notice of Proposed Rule Change by the National Association of Securities Dealers, Inc., Relating to the Use of Geographic Indicators Appended to Market Maker Identifiers Disseminated Over the NASD's OTC Bulletin Board Service

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33541; File No. SR-NASD-93-74]

Self-Regulatory Organizations; Notice of Proposed Rule Change by

the National Association of Securities Dealers, Inc., Relating to the

Use of Geographic Indicators Appended to Market Maker Identifiers

Disseminated Over the NASD's OTC Bulletin Board Service

January 28, 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 December

10, 1993, the National Association of Securities Dealers, Inc.

(``NASD'') 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 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 require market makers participating in the

NASD's OTC Bulletin Board Service (``OTCBB'') to append a

fifth-character, geographic indicator to their market maker identifier

(``MMID'') on the OTCBB screen when the firm's trading desk for a

particular security quoted on the OTCBB is located away from the firm's

primary trading office.\1\ The following is new language to be added to

the recently codified OTCBB rules. Language to be added is italicized.

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\1\On January 5, 1994, the Commission approved an NASD proposal

to codify the existing requirements respecting access to and the use

of the OTCBB. See Securities Exchange Act Release No. 33433 (January

5, 1994), 59 FR 1772 (January 12, 1994) (File No. SR-NASD-93-56).

Accordingly, the proposed OTCBB rule language contained in this

filing would amend that recent codification.

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OTC Bulletin Board Service Rules

Section 4

(c) In cases where a market maker has more than one trading

location, a fifth-character, geographic indicator shall be appended to

the market maker's identifier for that security to identify the branch

location where the security is traded. The fifth-character branch

indicators are established by the Association and published from time

to time in the Nasdaq/COS symbol directory.

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

1. Purpose

The NASD is proposing to amend section 4 of its OTCBB rules to

require market makers participating in the OTCBB to append a fifth-

character, geographic indicator to their MMIDs when the firm's trading

desk for a security quoted on the OTCBB is located away from the firm's

primary trading office. The NASD believes that the use of fifth-

character, geographic indicators is necessary to avoid confusion and

delay by market participants in contacting market makers in securities

quoted on the OTCBB. Specifically, the NASD believes that the use of

geographic indicators will ensure that traders will direct their calls

to the appropriate location where the market maker for the stock is

located and avoid instances where multiple phone calls are needed to

access a market maker's quote.

In addition, the NASD believes mandatory use of the fifth-

character, geographic indicator is necessary in light of developments

associated with the NASD's Nasdaq Workstation IISM service.

Specifically, with Nasdaq Workstation II, market makers' telephone

numbers will not be displayed on the OTCBB screen, but may be recalled

separately. Accordingly, once Nasdaq Workstation II is in operation,

unless fifth-character, geographic indicators are used, there may be

confusion among market participants concerning the trading location of

securities quoted on the OTCBB. The NASD also notes that the use of

fifth-character, geographic indicators already has been mandated for

market makers in securities traded on The Nasdaq Stock

Market.\2\

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\2\See Securities Exchange Act Release No. 31933 (February 26,

1993), 58 FR 12608 (March 5, 1993) (File No. SR-NASD-92-55).

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2. Statutory Basis

The NASD believes the proposed rule change is consistent with

section 15A(b)(6) of the Act. Section 15A(b)(6) requires that the rules

of a national securities association be designed to prevent fraudulent

and manipulative acts and 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, to remove impediments to and perfect the mechanism of a

free and open market and a national market system and, in general, to

protect investors and the public interest. Specifically, the NASD

believes the use of fifth-character, geographic indicators is

consistent with the maintenance of fair and orderly markets and the

facilitation of transactions in securities because it will eliminate

unnecessary confusion and delay in trading of securities and foster

cooperation between members and market makers effecting trades in

securities quoted on the OTCBB.

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

The NASD believes that the proposed rule change will not 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

Comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of publication of this notice in the

Federal Register or within such longer period (i) as the Commission may

designate up to 90 days of such date if it finds such longer period to

be appropriate and publishes its reasons for so finding or (ii) as to

which the NASD consents, the Commission will:

A. By order approve such proposed rule change, or

B. Institute proceedings to determine whether the proposed rule change

should be disapproved.

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 [insert date 21 days from the date of

publication].

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\3\

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\3\17 CFR 200.30-3(a)(12) (1989).

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Jonathan G. Katz,

Secretary.

[FR Doc. 94-2578 Filed 2-3-94; 8:45 am]

BILLING CODE 8010-01-M