Proposed Rule Changes of Self Regulatory Organizations; Annual Filing of Amendments to Registration Statements of National Securities Exchanges, Securities Associations, and Reports of the Municipal Securities Rulemaking Board

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 240, and 249

[Release No. 34-35123; File No. S7-17-94]

RIN: 3235-AG15

Proposed Rule Changes of Self Regulatory Organizations; Annual

Filing of Amendments to Registration Statements of National Securities

Exchanges, Securities Associations, and Reports of the Municipal

Securities Rulemaking Board

AGENCY: Securities and Exchange Commission.

ACTION: Final rules.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is

adopting amendments to Rule 19b-4 and Form 19b-4 under the Securities

Exchange Act of 1934 to expand the scope of proposed rule changes filed

by self-regulatory organizations that may become effective immediately.

The Commission also is amending its rules to delegate to the Director

of the Division of Market Regulation certain related functions. The

amendments implement recommendations contained in the Market 2000

report and are designed to expedite and streamline the process by which

proposed rule changes of self-regulatory organizations are filed and

become effective. In addition, the Commission is streamlining and

conforming the requirements for national securities exchanges and

securities associations to file annual amendments to their registration

statements, and for the Municipal Securities Rulemaking Board to file

annual reports.

EFFECTIVE DATE: January 27, 1995.

FOR FURTHER INFORMATION CONTACT: (prior to the effective date)

Catherine McGuire, Chief Counsel, or Andrew S. Margolin, Senior

Counsel, Office of Chief Counsel, at (202) 942-0073; (after the

effective date) for exchange rules, Sharon Lawson, Assistant Director,

at (202) 942-0182, or Ivette Lopez, Senior Special Counsel, at (202)

942-0765; for National Association of Securities Dealers and Municipal

Securities Rulemaking Board rules, Katherine A. England, Assistant

Director, at (202) 942-0154; for clearing agency rules, Jerry

Carpenter, Assistant Director, at (202) 942-4187, Office of Market

Supervision, Division of Market Regulation, Securities and Exchange

Commission, 450 Fifth Street, NW., Mail Stop 5-1, Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

I. Introduction

On June 1, 1994, the Commission proposed for public comment

amendments to Rule 19b-41 and Form 19b-42 under the

Securities Exchange Act of 19343 (``Exchange Act'' or ``Act''),

the rule and form applicable to the process by which self-regulatory

organizations (``SROs'') file proposed rule changes with the

Commission.4 The proposal was intended to expedite the rule filing

process by expanding the categories of proposed rule changes that may

become effective upon filing pursuant to Section 19(b)(3)(A)5 of

the Act to include certain systems changes and other noncontroversial

filings. The Commission also proposed amendments to Rules 6a-2,6

15Aj-1,7 17a-21,8 and Form X-15AJ-29 under the Act, to

streamline and conform the annual filing requirements of amendments to

registration statements of national securities exchanges and securities

associations, and annual reports of the Municipal Securities Rulemaking

Board (``MSRB'').

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\1\17 CFR 240.19b-4.

\2\17 CFR 249.819.

\3\15 U.S.C. 78a, et seq.

\4\Securities Exchange Act Release No. 34140 (June 1, 1994), 59

FR 29393 (``Proposing Release'').

\5\15 U.S.C. 78s(b)(3)(A).

\6\17 CFR 240.6a-2.

\7\17 CFR 240.15Aj-1.

\8\17 CFR 240.17a-21.

\9\17 CFR 249.803.

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The proposals implement recommendations contained in the Division

of Market Regulation's (``Division'') Market 2000 report.10 The

report recommended that the rule filing process be expedited for

routine procedural and administrative modifications to existing order-

entry and trading systems. The Division also agreed to consider other

types of SRO proposals that could be subject to an expedited review

process.

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\1\0Division of Market Regulation, Market 2000: An Examination

of Current Equity Market Developments (January, 1994).

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The Commission received nine comment letters in response to its

request for comments.11 Commenters expressed general support for

these proposals, and also suggested other ways to improve the SRO rule

filing process. The Commission has determined to adopt the amendments

substantially as proposed with some modifications designed to address

the comments received.12 The Commission also is providing further

clarification on the application of amended Rule 19b-4.

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\1\1See Letters to Jonathan G. Katz, Secretary, Securities and

Exchange Commission, from: James E. Buck, Senior Vice President and

Secretary, New York Stock Exchange (``NYSE''), dated August 12,

1994; Richard G. Ketchum, Chief Operating Officer and Executive Vice

President, National Association of Securities Dealers (``NASD''),

dated August 16, 1994; James F. Duffy, Executive Vice President and

General Counsel, American Stock Exchange (``Amex''), dated August

18, 1994; Michael L. Myers, Schiff Hardin & Waite [on behalf of the

Chicago Board Options Exchange (``CBOE'') and the Options Clearing

Corporation (``OCC'')], dated August 12, 1994; J. Craig Long,

Secretary, Chicago Stock Exchange (``CHX''), dated August 8, 1994;

Larry R. Shotwell, Executive Vice President, Pacific Stock Exchange

(``PSE''), dated August 12, 1994; David C. Clapp, Chairman,

Municipal Securities Rulemaking Board (``MSRB''), dated August 3,

1994; William W. Uchimoto, First Vice President and General Counsel,

Philadelphia Stock Exchange (``Phlx''), dated August 19, 1994; and

John I. Fitzgerald, Executive Vice President, Boston Stock Exchange

(``BSE''), dated August 8, 1994. The comment letters and a summary

of comments are contained in Public File No. S7-17-94.

\1\2These amendments may affect clearing agencies for which the

Commission is not the appropriate regulatory agency as defined in

Exchange Act Sec. 3(a)(34), 15 U.S.C. 78c(a)(34). Therefore, in

accordance with Exchange Act Sec. 17A(d)(3)(A)(i), 15 U.S.C. 78q-

1(d)(3)(A)(i), at least 15 days before this announcement, the

Commission consulted and requested the views of the Board of

Governors of the Federal Reserve System.

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II. Amendments to Rule 19b-4

Under Section 19(b) of the Act, an SRO is required to file with the

Commission its proposed rule changes.13 Once a proposed rule

change is filed, the Commission is required to publish notice of it and

provide an opportunity for public comment. The proposed rule change may

not take effect unless approved by the Commission or unless the rule

change is within the class of rule changes effective upon filing

pursuant to Section 19(b)(3)(A).14

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\1\315 U.S.C. 78s(b)

\1\4See Proposing Release for a more complete discussion of this

process.

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Under Section 19(b)(3)(A) of the Act and Rule 19b-4(e) thereunder,

a proposed rule change may take effect upon filing without the notice

and approval procedures required by Section 19(b)(2) if the proposed

rule change comes within prescribed statutory categories,15

including matters which the Commission may, consistent with the public

interest and the purposes of this subsection, specify by rule.

Accordingly, the Commission is amending Rule 19b-4 to add two new

categories of proposed rule changes that can become effective in this

manner: (1) Routine procedural and administrative modifications to

existing order-entry and trading systems (the ``existing systems

category''); and (2) certain other noncontroversial filings (the

``noncontroversial category'').16 The Commission believes that

these amendments are consistent with the general principles of the

Exchange Act applicable to the approval of SRO rule changes that ensure

that meaningful public comment is reflected where necessary. All rule

changes that become effective under Section 19(b)(3)(A) will continue

to be subject to abrogation by the Commission within 60 days of the

filing.17

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\1\5These include rule changes that (1) Constitute a stated

policy, practice, or interpretation with respect to the meaning,

administration, or enforcement of an existing rule of the SRO, (2)

establish or change a due, fee, or other charge imposed by the SRO,

or (3) that are concerned solely with the administration of the SRO.

15 U.S.C. 78s(b)(3)(A).

\1\6These categories will be established by amending Rule 19b-4

to add paragraph (e)(5) for the systems category and paragraph

(e)(6) for the noncontroversial category, and by making conforming

changes to Form 19b-4.

\1\715 U.S.C. 78s(b)(3)(C).

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A. Systems Changes

In the Proposing Release, the Commission proposed to allow SRO rule

changes dealing with routine procedural and administrative

modifications to existing order-entry and trading systems to become

effective upon filing pursuant to Section 19(b)(3)(A) of the Act.

Historically, it has been required that these modifications be filed

under Section 19(b)(2).18 The proposed amendments limit the scope

of the existing systems category to those systems changes that: (1) Do

not significantly affect the protection of investors or the public

interest; (2) do not impose any significant burden on competition; and

(3) do not have the effect of limiting the access to or availability of

the system.

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\1\8See, e.g., Letter from Richard T. Chase, Assistant Director,

SEC, to Frank Wilson, Executive Vice President, NASD (February 4,

1983).

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Commenters supported this proposal because it would address

concerns that the filing process with respect to these types of rule

changes can be too lengthy, and hampers the ability of SROs to provide

prompt, flexible, and innovative systems changes. Several commenters,

however, requested further clarification of when a systems change

requires a filing, and whether such filings would be eligible to become

effective upon filing under the existing systems category.

1. Systems Changes that Require Rule Change Filings

The NASD commented that certain changes related to order-entry and

trading systems should not be considered proposed rule changes at all

and should be exempt from the filing process. The NASD cited changes

involving the format and appearance of screens, keystroke commands,

underlying hardware and software changes, and the user manuals and

technical guides to system operation. The NASD stated that these

filings rarely would pose significant concerns in the areas of investor

protection, public interest, or fair competition.

While changes to the format and appearance of screens, or changes

involving the underlying hardware and software may not need to be filed

pursuant to Section 19(b)(2) in many instances, the Commission cannot

state as a general matter that these changes are never required to be

filed. For example, if an SRO decided to alter the format and

appearance of a system providing quotation information by excluding the

market maker or market specialist identifier, thus making it virtually

impossible for a system user to determine the origination of a quote,

the SRO would then be required to file a proposed rule change with the

Commission. The Exchange Act requires SROs to have rules designed,

among other things, to remove impediments to and perfect the mechanism

of a free and open market and a national market system.19 Thus,

any change to a system providing quotation information that would

affect the maintenance of a free and open market or a national market

system would be required to be filed with the Commission.

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\1\915 U.S.C. 78f(b)(5) and 78o-3(b)(6).

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Similarly, changes to keystroke commands would generally not

require a filing. If such a change, however, would have the effect of

prohibiting entry of certain types of orders, such as a series of

keystrokes so cumbersome that it has the effect of prohibiting the

entry of orders priced outside the current inside market, that change

would require a filing pursuant to Section 19(b)(2).20 While

software or hardware changes generally do not require a filing pursuant

to Section 19(b)(2), the Commission has suggested that significant

hardware and software changes be reported to the Commission on an

annual and an as-needed basis, as stated in its most recent Automation

Review Policy.21

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\2\0In fact, the Commission recently was presented with a

situation which raised this very issue and demonstrated the need for

filing pursuant to Section 19(b)(2). On October 25, 1993, the NASD

filed with the Commission a proposed rule change to modify the

SelectNet service by prohibiting entry of orders in SelectNet priced

outside the inside Nasdaq market. Securities Exchange Act Release

No. 33101 (Oct. 25, 1993), 58 FR 58363 (File No. SR-NASD-93-60). The

NASD filed that rule change pursuant to Section 19(b)(3)(A) of the

Act which became effective immediately. On October 29, 1993,

pursuant to Section 19(b)(3)(C) of the Act, the Commission abrogated

the rule change on the basis that it should have been filed pursuant

to Section 19(b)(2) and thus, subject to notice and comment.

Securities Exchange Act Release No. 33116 (Oct. 29, 1993), 58 FR

58883. On November 1, 1993, the NASD refiled with the Commission the

proposed rule change pursuant to Section 19(b)(2) of the Act.

Securities Exchange Act Release No. 33141 (Nov. 3, 1993), 58 FR

59504 (File No. SR-NASD-93-61). Due to concerns about whether the

NASD's proposal was consistent with the Act, the Commission

instituted proceedings pursuant to Section 19(b)(2)(B) of the Act to

determine whether the proposed rule change should be disapproved.

Securities Exchange Act Release No. 34000 (May 3, 1994), 59 FR

23909. Subsequently, the NASD modified the SelectNet keystroke

procedures for entering and accepting orders outside the inside

Nasdaq market. The modification provided a warning to SelectNet

participants that the order is priced outside the inside market but

allows participants to override the warning. Because this

modification neither significantly altered SelectNet nor denied

access to SelectNet, the change was not considered a proposed rule

change and thus did not require filing with the Commission. As a

result, the NASD withdrew its proposed rule change and the

Commission terminated the proceedings to determine whether to

disapprove the proposal. Securities Exchange Act Release No. 34486

(Aug. 4, 1994), 59 FR 40933.

\2\1Securities Exchange Act Release No. 29185 (May 9, 1991), 56

FR 22490.

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User manuals and technical guides for a particular system, as a

general matter, need not be filed with the Commission. It has been the

Commission's experience, however, that at times, a clear understanding

of how the system functions may be achieved only by reviewing the rules

of the SRO in conjunction with the user manual or technical guide. The

Commission believes that it is more appropriate to have the relevant

information in the SRO's rules so that it may be available to anyone

seeking an understanding of the system's operation.22 It is the

SRO's responsibility to make the initial determination of whether an

action an SRO is contemplating will require a filing, including whether

to file user manuals and technical guides. Whether any particular guide

needs to be filed must be determined on a case by case basis.23

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\2\2The SRO's rules should indicate, for example, the types and

size of orders, and with specificity, the manner in which orders

will be processed in the system. Specifically, with respect to a

system such as SelectNet, it is important to know how the different

types of orders are displayed and to whom they are displayed. See

Letter from David Humphreville and Caroline B. Austin, Co-Chairs,

National Specialist Association to Jonathan G. Katz, Secretary, SEC,

dated November 6, 1992 (commenting on File No. SR-NASD-92-16).

Information explaining the combination of keystrokes that must be

used to accept an order may be more appropriate for a user manual or

technical guide.

\2\3If an SRO has failed to explain clearly in its rules how a

particular system functions, including who has access to the system,

it should consider submitting a proposed rule change comprising the

relevant information contained in the guide or manual.

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2. Scope of Filings Eligible for the Existing Systems Category

In the Proposing Release, the Commission cited examples of the type

of proposed rule change that would be within the existing systems

category. For example, a proposed rule change that would increase

marginally the maximum number of shares per order that could be

executed through an SRO's small order routing and execution system, or

a proposed rule change that would expand the number of series or

classes eligible for options routing and execution systems generally

could be filed pursuant to Section 19(b)(3)(A).

In addition, the Commission believes that the following recent

filings also exemplify the type that would qualify for the existing

systems category: a rule change requiring the use of a special

indicator for average-priced trade reports,24 and one requiring

OTC Bulletin Board (``OTCBB'') market makers to append a fifth

character to their market maker identifier as a geographic indicator

when trading away from primary offices.25

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\2\4File No. SR-NASD-93-20.

\2\5File No. SR-NASD-93-74.

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The NASD suggested that the term ``trading system'' should be

clarified to include automated services that support trading, trade

reporting, and clearance and settlement, such as the OTCBB and the

Automated Confirmation Transaction service (``ACT''). The NASD

recommended that changes to these systems should be eligible under

either the existing systems category, or the noncontroversial category

discussed below.

The Amex requested that the Commission make clear that changes to

automatic equity order execution systems that could interfere with

providing best execution would be precluded from filing under Section

19(b)(3)(A). The Amex also requested that the Commission not limit the

availability of the existing systems category to only marginal

increases in the number of shares per order that can be entered and

executed through a small order routing and execution system, as stated

in the Proposing Release, but also include significant increases in

certain circumstances.

While the Commission generally believes that it may be reasonable

to interpret broadly the term ``trading system,'' to include related

automated services such as the OTCBB or ACT, such that changes to those

services could be eligible for filing under the existing systems

category, the Commission also believes, for example, that a proposal to

expand the category of eligible securities in connection with a system

to include foreign securities would raise investor protection and

competitive concerns, and would thus be subject to review pursuant to

Section 19(b)(2).

The Commission recognizes, as noted by the Amex, that a proposed

rule change that interferes with best execution obligations would

significantly affect the protection of investors and thus would not

satisfy the conditions for expedited treatment set forth in the rule.

The Commission also believes that a proposed rule change that

substantially increases the number of shares per order routed or

executed through a small order execution system may in some

circumstances be eligible for expedited treatment. Such a proposed rule

change, however, generally would not be eligible to become effective

upon filing under the existing systems category because a change in the

order size of substantial magnitude would not qualify as a modification

of an existing system, but in effect establishes a new system. Thus, it

generally will be more appropriate to file significant increases in

order size under the noncontroversial category discussed below.

The Commission is adopting the amendments concerning existing

systems changes as originally proposed. The Commission believes that,

because these types of proposed rule changes deal with operational

details of existing systems and are subject to certain limitations in

the rule, they do not require the full notice and review procedures of

Section 19(b)(2). The amendments bring the filing procedures for this

type of proposed rule change in line with procedures that have been in

effect for clearing agencies since 1980.26

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\2\6A proposed rule change of a registered clearing agency can

become effective upon filing pursuant to Rule 19b-4 if it effects a

change in an existing service that (1) does not adversely affect the

safeguarding of securities or funds in the custody or control of the

clearing agency or for which it is responsible and (2) does not

significantly affect the respective rights or obligations of the

clearing agency or persons using the service. See Securities

Exchange Act Release No. 17258 (October 30, 1980), 45 FR 73906.

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B. Noncontroversial Filings

As proposed, the amendments to Rule 19b-4 also would expand the

scope of proposed rule changes that may become effective upon filing

under Section 19(b)(3)(A) to include certain noncontroversial filings.

For these filings, SROs would be required to provide written notice to

the Commission five business days prior to the filing.27 This

notice would provide Commission staff an opportunity to discuss with

the SRO whether there exists an adequate basis upon which the proposed

rule change may properly qualify under Section 19(b)(3)(A), and could

elicit guidance from Commission staff to help the SRO identify those

aspects of a proposed rule change that the Commission deems

important.28 Proposed rule changes in the noncontroversial

category, by their terms, would become operative 30 days after the date

of publication of the notice, or such shorter time as the Commission

may designate.

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\2\7As stated in the Proposing Release, the Commission expects

that such notices will be informal and often transmitted by

facsimile. The notice should be directed to the appropriate Division

staff responsible for reviewing that SRO's filings of proposed rule

changes. The Commission intends to place this notice in a public

file. See Exchange Act Sec. 23(a)(3), 15 U.S.C. 78w(a)(3).

For every clearing agency for which the Commission is not the

appropriate regulatory agency, the notice also must be filed with

the appropriate regulatory agency for the clearing agency as

required by Exchange Act Sec. 17(c)(1), 15 U.S.C. 78q(c)(1).

Consistent with the requirements of that section, the Commission

also would expect the MSRB to file such notices with each agency

enumerated in Exchange Act Sec. 3(a)(34)(A), 15 U.S.C.

78c(a)(34)(A).

\2\8This also should help the SRO articulate in its subsequent

filing the purpose and effects of the proposed rule change, which in

turn should further facilitate and expedite the filing process.

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The proposal of the noncontroversial category elicited significant

comment. The comments focused on the timing of the effectiveness of

these noncontroversial filings, and the scope of proposed rule changes

that may be filed under this category. Commenters also voiced concerns

relating to the publication of notices of proposed rule changes

generally.

1. Timing of Effectiveness

Commenters indicated that the 30-day delayed operational date was

too lengthy for noncontroversial rule filings and that, in any case,

the operational date was not predictable.29 Commenters offered a

variety of suggestions about how to address this issue. While some

suggested that the period be shortened,30 others suggested

eliminating the period altogether or granting authority to delay the

operation of the rule only in specific circumstances.31 Several

recommended that the 30-day period run from the date of the filing

rather than the date of publication.32 The Amex requested that the

Commission clarify procedures applicable to the filing of amendments to

proposed rule changes under the noncontroversial category, and

requested that there be an explicit mechanism for requesting that the

30-day period be shortened. The Amex also recommended that the five-day

period for submitting a pre-filing notice be a maximum, and not a

minimum period, so as not to preclude submission of the subsequent

filing less than five days later, in the event that the Commission

determines in a shorter time that the filing is appropriately filed

under this category.

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\2\9See, e.g., Letter from NYSE.

\3\0See, e.g., Letter from Amex.

\3\1Letter from NYSE.

\3\2Letters from CBOE, CHX, Phlx.

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Related to the timing of effectiveness is the matter of publishing

notices of proposed rule changes. Several commenters were critical of

the length of time between the filing of a proposed rule change and its

publication in the Federal Register. The CBOE, for example, argued that

in some cases the publication of the notice has been inordinately

delayed. The Phlx stated that the delay results from a lengthy pre-

publication review by the Commission. The NYSE and the NASD suggested

that the Commission adopt an internal guideline on publishing notices

to address this perceived problem.

The Commission believes that a 30-day delayed operational date for

noncontroversial filings is necessary and appropriate. If, as a result

of either subsequent Commission review or public comment, it is

determined that a proposed rule change was not properly filed as within

the noncontroversial category, the 30-day period would allow the

Commission to abrogate the rule change without a significant disruption

in existing operations.

To address concerns of commenters, however, the Commission has

determined to commence the 30-day period with the filing date of the

proposed rule change, instead of the publication date as originally

proposed. This will enable SROs to implement a proposed rule change

more quickly, while preserving the opportunity for meaningful public

comment. A 30-day period triggered by the filing date provides

predictability while assuring that the filing is reviewed not only by

the staff but also by commenters.

With respect to amendments to filings in the noncontroversial

category, the Commission believes that any substantive amendment would

trigger a new 30-day period, assuming that the changes do not render

the filing ineligible for this category. The staff would, however, have

discretion to accept editorial changes without triggering a new 30-day

period. The Commission notes that this procedure was designed to

expedite those SRO filings that are inherently simple and concise, and

that would otherwise require little in the way of extended review or

analysis by the Commission. A filing requiring further substantive

amendments may indicate that it is not appropriate for the expedited

treatment afforded by the noncontroversial category.

Form 19b-4 also has been amended to state that an SRO requesting

the Commission to shorten the 30-day period should provide a statement

explaining why the Commission should do so. With respect to the five-

day pre-filing period, the Commission is amending the rule to permit

the Commission to designate a shorter period if appropriate.

As the Commission has stated in the past, its intent is to publish

all notices of proposed rule changes promptly.33 In light of

comments received, the Commission will redouble its efforts to do so in

the future. The Commission notes, however, that notices of proposed

rule changes need to be clear in order to elicit meaningful public

comment. Although a proposed rule change may be accepted as filed, the

Commission believes that it should not be published until it has

reached an adequate level of clarity regarding the issues raised by the

filing. For complex filings, this can require more extensive review.

Filings of rule changes also need to include information necessary to

enable the Commission's staff to conduct a complete review. Any filings

that fail to comply with the requirements of Form 19b-4 may be returned

to the SRO and will be deemed not to have been filed with the

Commission.

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\3\3Securities Exchange Act Release No. 17258 (October 30,

1980), 45 FR 73906.

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2. Scope of Filings Eligible for the Noncontroversial Category

Many commenters requested further clarification of the scope of

this proposal. While it would be impossible to identify with certainty

in advance every type of proposed rule change that may qualify for the

noncontroversial category, the discussion below should assist SROs in

assessing its availability.

The noncontroversial category applies only to those proposed rule

changes that are properly designated by the SRO as not significantly

affecting the protection of investors or the public interest and not

imposing any significant burden on competition. As indicated in the

Proposing Release, proposed rule changes meeting these criteria

generally are less likely to engender adverse comments or require the

degree of review attendant with more controversial filings.

In the Proposing Release, the Commission cited examples of proposed

rule changes that would be eligible for the noncontroversial category,

such as certain proposed rule changes that would add an existing rule

to an SRO's minor rule violation plan, and proposed rule changes that

permit the transmission of data to or from the SRO by computer

interface or other electronic means. The Proposing Release also made

clear, however, that for policy reasons, a proposed rule change that

would reduce public representation in the administration of the affairs

of an SRO or that would amend the procedures for arbitration or

disciplinary proceedings would not be a proper candidate to become

effective under Section 19(b)(3)(A).

In its comment letter, the NYSE stated that the scope of the

proposal for noncontroversial filings would depend on the

interpretation of the term ``significant'' as it is used in the

amendments. In requesting that the Commission provide further guidance

on the scope of this proposal, the NYSE indicated that, based on a

survey of its filings for 1993 and the first half of 1994, its staff

believed that the overwhelming majority of its rule changes would not

have been eligible for expedited treatment. The NASD and the Amex

suggested that the Commission apply an expedited approach to proposed

rule changes that ``clone'' or are virtually identical to other rule

changes filed by another SRO that already have been approved by the

Commission. The NASD also questioned the general utility of the

noncontroversial category to the extent that a competitor could

unjustifiably impede the expedited treatment of an SRO's proposed rule

change simply by filing a perfunctory adverse comment letter.

The Commission would like to make clear that although it intends to

expedite the rule filing process, it is doing so only with respect to

the universe of proposed rule changes that are not likely to engender

adverse comments or otherwise warrant the type of review required by

Section 19(b)(2) of the Act. With respect to the NYSE's survey of its

filings, the Commission staff has determined that, of 72 NYSE proposed

rule changes identified as being filed during the period surveyed by

the NYSE, at least seventeen, in retrospect, would have qualified for

expedited treatment under the noncontroversial category. These include

filings that: (1) conformed the NYSE pre-opening application to the

Intermarket Trading System by clarifying the use of a cancellation

notification sent after a pre-opening notification;34 (2) similar

to other proposals approved for the Amex and CBOE, provided for the

listing and trading of quarterly index expiration options;35 (3)

amended floor conduct and safety guidelines not dealing with procedural

rights of offender (two filings);36 (4) rescinded two NYSE rules,

Rules 391 and 392, which served little purpose in light of the

Commission's rescission of its Rule 10b-2;37 (5) extended until

January 31, 1994, off-hours trading and the matched market-on-close

pilot program;38 (6) added to the exchange's minor rule violation

plan NYSE Rule 410B, which requires members and member organizations to

report trades in exchange listed stocks not otherwise reported to the

Consolidated Tape;39 (7) related to registration and

fingerprinting of floor members and employees;40 (8) amended the

exchange's minor rule violation plan to include exchange procedures

with respect to entry and cancellation of market-at-the-close orders on

expiration days, and other rules for which determinations of violations

can be made objectively (two filings);41 (9) extended for one year

the NYSE's pilot program for position limit exemptions for certain

hedged equity and stock index option positions;42 (10) increased

insubstantially the exchange's continuing listing fees;43 (11)

extended Rule 103A relating to specialist stock reallocation;44

(12) amended NYSE Rule 321 by clarifying the term ``control'' and

substituting the word ``subsidiary'' for the word ``affiliate'' in

Rules 113 and 122;45 (13) authorized the NYSE to provide to the

Central Registration Depository information concerning pending formal

disciplinary proceedings;46 (14) for audit trail reporting

purposes, added identification codes for short sales exempt from

Commission or exchange rules;47 and (15) extended the exchange's

circuit breaker pilot program.48

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\3\4File No. SR-NYSE-93-01.

\3\5File No. SR-NYSE-93-04.

\3\6File Nos. SR-NYSE-93-14 and SR-NYSE-93-25.

\3\7File No. SR-NYSE-93-20.

\3\8File No. SR-NYSE-93-23.

\3\9File No. SR-NYSE-93-24.

\4\0File No. SR-NYSE-93-28.

\4\1File Nos. SR-NYSE-93-35 and SR-NYSE-93-38.

\4\2File No. SR-NYSE-93-42.

\4\3File No. SR-NYSE-93-46. See discussion on fee-related

filings in this section, infra.

\4\4File No. SR-NYSE-94-07.

\4\5File No. SR-NYSE-94-09.

\4\6File No. SR-NYSE-94-11.

\4\7File No. SR-NYSE-94-16.

\4\8File No. SR-NYSE-94-34.

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In addition, the staff of the Commission has identified other

filings that are representative of the types of filings that could

qualify for the noncontroversial category. These include filings that:

(1) deleted that part of Schedule D to NASD by-laws concerning

publication and dissemination of quotations to the news media, to

reflect current NASD practice;49 (2) deleted the section of NASD

by-laws regarding a local quotations program that had been phased

out;50 (3) required members to adjust certain orders when

securities are quoted ex-dividend, ex-rights, and ex-interest;51

(4) eliminated existing regulatory requirements for non-Nasdaq OTC

securities once real-time reporting of those securities had been

approved by the Commission;52 (5) extended previously approved

pilot linkages between Nasdaq and foreign exchanges;53 (6)

mandated market maker use of registered clearing agencies;54 and

(7) provided a procedure for the immediate publication of final

disciplinary sanctions.55 Moreover, it is the Commission's view

that mechanical or simple editorial changes to existing rules, such as

when a change in an SRO's rule numbering system results in incorrect

cross-references in other rules, may be filed within the

noncontroversial category.

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\4\9File No. SR-NASD-93-14.

\5\0File No. SR-NASD-93-40.

\5\1File No. SR-NASD-93-52.

\5\2File No. SR-NASD-93-68.

\5\3File Nos. SR-NASD-94-23, SR-NASD-94-25, and SR-NASD-94-30.

\5\4File No. SR-NASD-94-28.

\5\5File No. SR-NASD-94-59.

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As noted above, under Section 19(b)(3)(A)(ii) of the Act, rule

changes that establish or change a due, fee, or other charge imposed by

the SRO may become effective upon filing.56 The Commission notes

that the filing of a proposed fee applicable to members may nonetheless

raise significant regulatory issues and thus be required, consistent

with current Commission policy, to be submitted pursuant to Section

19(b)(2).57 In addition, the Commission continues to believe that,

as a matter of general policy, an SRO proposed rule change that

establishes or changes a due, fee or other charge applicable to a non-

member or non-participant must be filed under Section 19(b)(2) for full

notice and comment.58 While filings concerning fees applicable to

non-members have not been eligible to become effective upon filing

under Section 19(b)(3)(A)(ii), some such filings now may qualify for

expedited treatment under the noncontroversial category.59

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\5\6See note 15, supra.

\5\7See, e.g., Securities Exchange Act Release No. 32377 (May

27, 1993), 58 FR 31568 (File No. SR-NYSE-93-08) (approving NYSE

proposal to grant an additional system credit to member and member

organizations for all individual and agency orders of a certain

size, except orders for the account of a non-member competing market

maker, routed through the NYSE's SuperDot system for execution);

Securities Exchange Act Release No. 27286 (September 21, 1989), 54

FR 40224 (File No. SR-NASD-88-55) (approving NASD proposal relating

to the imposition on certain member firms of an assessment on annual

gross income from transactions in U.S. Government Securities).

\5\8Securities Exchange Act Release No. 17258 (October 30,

1980), 45 FR 73906, at 73910 n.40. See, e.g., Securities Exchange

Act Release Nos. 33123 (October 29, 1993), 58 FR 59083 (File No. SR-

NASD-93-49) (approving NASD proposal to extend Bond Quotation Data

Service fees to non-member subscribers); 34272 (June 28, 1994), 59

FR 34701 (File No. SR-Amex-94-12) (approving Amex proposal to reduce

maximum fees for original stock listings by domestic and foreign

issuers).

\5\9For example, if an SRO proposes a reasonable and relatively

minor increase in an existing fee, or a proposal that is virtually

identical to fees of other SROs, provided that the proposal does not

raise other regulatory issues, such proposal would qualify under the

noncontroversial category.

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Furthermore, the Commission will retain a flexible approach in

applying amended Rule 19b-4. For example, absent unusual circumstances,

filings that are virtually identical to an SRO filing already approved

by the Commission will be eligible for expedited treatment under the

noncontroversial category. While the Commission generally requires that

proposals for exchange listing of new hybrid securities be submitted to

the Commission for full review pursuant to Section 19(b)(2) of the Act

to ensure that all significant regulatory concerns have been addressed,

the Commission also believes that new proposals relating to these

products that only change certain characteristics of the products could

be eligible for expedited treatment under the noncontroversial

category. Once the staff has completed the review process for a

particular new product, the need for a full review of subsequent

similar proposals is significantly reduced. For example, the Commission

has required exchanges to submit for full review under Section 19(b)(2)

proposals to list and trade MITTS and SUNS, which are products linked

to various baskets of securities.60 Because the review of new

proposals that seek to change, for example, only the composition of the

underlying baskets generally will be limited to the composition of

those baskets, and because the Commission is now familiar with the

basic structure for MITTS and SUNS, subsequent proposals should be

eligible for the noncontroversial category.61 This will expedite

the approval of the listing of these products.

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\6\0See Securities Exchange Act Release No. 32840 (September 2,

1993), 58 FR 47485 (order approving Global Telecommunications MITTS

portfolio).

\6\1See, e.g., Securities Exchange Act Release No. 34655

(September 12, 1994), 59 FR 47966 (order approving the listing of

REIT Portfolio MITTS); Securities Exchange Act Release No. 33495

(January 19, 1994), 59 FR 03883 (order approving the listing of

Telecommunications Basket SUNS).

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The Commission notes, however, that an expedited approach would not

necessarily apply, as the Amex suggested, to a proposal to trade index

warrants on a stock index previously approved by the Commission for

options trading. While use of the procedure could be considered on a

case by case basis, as a general rule different types of derivative

products, albeit based on the same underlying index, may not be

sufficiently identical to be eligible for this treatment.

With respect to the concern that a competitor may cause a proposed

rule change of an SRO to be deemed improperly filed under the

noncontroversial category merely by submitting a comment letter

critical of the filing, the Commission expects that a comment letter

would have to raise issues that legitimately suggest that the proposed

rule change is inconsistent with the requirements of the Exchange Act

or regulations thereunder applicable to that SRO in order for the rule

change to be abrogated and refiled under Section 19(b)(2).

The CBOE commented that it is unclear whether the notice published

by the Commission indicating that a rule change has become effective

upon filing would be sufficient to prevent a collateral attack based on

the assertion that the rule change was improperly filed under the Act.

The Commission concurs with the CBOE's interpretation that a rule

change filed under Rule 19b-4(e) is deemed to have been properly filed

thereunder if the Commission fails to abrogate it within the 60 day

period for such action.

Finally, the CHX urged the Commission to interpret all corporate

governance changes that do not decrease the number of public governors

as being within the provision of Section 19(b)(3)(A) that permits a

proposed rule change to take effect upon filing if it is ``concerned

solely with the administration of the SRO.'' The governance structure

of the SROs is the subject of specific statutory standards. Because a

change in the overall makeup of the governance structure of an SRO

could be effected without necessarily decreasing the number of public

governors, the Commission does not concur in this interpretation.

In sum, the Commission is adopting amendments to Rule 19b-4 for the

noncontroversial category with the following modifications: (1) the 30-

day period after which a noncontroversial filing may become effective

will begin with the filing date; (2) Form 19b-4 will state that an SRO

requesting the Commission to shorten the 30-day period should provide a

statement explaining its reasons for so requesting; and (3) Rule 19b-4

will permit the Commission to shorten the 5-day period in which SROs

are required to file a notice of their intent to file, if

appropriate.62

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\6\2The Commission is delegating to the Director of the Division

of Market Regulation the functions of shortening the 30 and five-day

periods. See Section II.C. below.

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C. Delegation of Authority to the Director of the Division of Market

Regulation

The Commission currently has the authority under Section

19(b)(3)(C) of the Exchange Act to abrogate summarily within 60 days of

filing any proposed rule change that becomes effective under Section

19(b)(3)(A) 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 Exchange

Act.63 The Proposing Release indicated that if the proposals to

expand the scope of Section 19(b)(3)(A) are adopted, the Commission

will revise its rules to delegate this abrogation authority to the

Director of the Division of Market Regulation.

---------------------------------------------------------------------------

\6\315 U.S.C. 78s(b)(3)(C).

---------------------------------------------------------------------------

As indicated in the Proposing Release, this would be necessary to

facilitate an expected increase in the volume of proposed rule changes

that would be filed under Section 19(b)(3)(A). In particular, the

Commission expects that the staff will abrogate filings if it becomes

aware of issues that would warrant further consideration under the

procedures set forth in Section 19(b)(2), such as those involving

possible burdens on competition or effects on investor protection.

Accordingly, the Commission is delegating this function, as well as the

related functions of shortening the 30 and five-day periods under

paragraph (e)(6) of Rule 19b-4, to the Director of the Division.

In addition, the Commission is delegating to the Director of the

Division the authority under Section 19(b)(2)(B) of the Exchange Act to

institute proceedings to determine whether a proposed rule change

should be disapproved.64 It is the Commission's view at this time

that filings that are not resolved within six months of submission

generally should be withdrawn or, in the alternative, subject to

disapproval proceedings. Although the Commission has directed its staff

to request that SROs withdraw a number of filings of proposed rule

changes not approved within that period, this delegation of authority

is necessary to enable the Division to implement these internal

guidelines.

---------------------------------------------------------------------------

\6\415 U.S.C. 78s(b)(2)(B).

---------------------------------------------------------------------------

The Commission does not intend to prevent SROs from moving forward

with their rule changes. The Commission suggests, however, that when it

becomes obvious that a resolution of issues for a particular filing is

not forthcoming, it may be more appropriate for the SRO to advance the

initiative outside of the rule filing mechanism until such time as it

is in form for approval. The staff of the Commission will be available

to assist SROs in this regard.65 The Commission believes that this

will maintain accountability on the part of both Commission staff and

SROs by assuring that complex filings are not abandoned and allowed to

stagnate within the rule filing process. These amendments add new

paragraphs (a)(57), (a)(58), and (a)(59) to Rule 30-3 of the

Commission's rules of Organization and Program Management.

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\6\5The Commission recognizes that in certain instances there

will be differences in opinion between the staff and SROs regarding

the handling of a rule filing. In such instances, the SROs are

always free to inform the Commission so that it may help expedite

the processing of the filing in an appropriate manner.

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D. Submission of Form 19b-4 on Computer Diskette and Miscellaneous

Amendments

The Commission noted in the Proposing Release that significant

staff resources are devoted to processing proposed rule changes and

preparing them for publication, and encouraged SROs to submit Form 19b-

4 and the notice for publication (Exhibit 1 to the form) on computer

diskette in an appropriate wordprocessing format.66 The paper

version of these documents would continue to be required, but the

electronic version would provide a more efficient way for Commission

staff to review and prepare the initial notice for publication in the

Federal Register.

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\6\6Currently, the staff of the Commission uses Wordperfect 5.0.

---------------------------------------------------------------------------

The Commission also is adopting amendments as proposed that will

reduce the number of copies of Form 19b-4 and Exhibit 1 that SROs must

submit from twelve to nine, including the manually signed original.

Although the Commission originally proposed reducing the number of

copies to eight, it has determined that nine copies would be optimal

based on current staff distribution requirements. In addition, the

Commission is correcting miscellaneous outdated references contained in

the form with respect to the Commission's address and appropriate

offices within the Division to which filings of proposed rule changes

should be directed.

III. Amendments to the Annual Filing Requirements for SROs and the

MSRB

A registered or exempted securities exchange generally must file

annual amendments to its registration statement with the Commission

pursuant to Rule 6a-2 under the Exchange Act.67 The information

contained in these annual filings includes, among other things, lists

of officers, governors, and committee members, as well as various forms

used by the exchange, listing applications, listing fee schedules,

membership lists, and securities listed on the exchange.68

Exchange Act rules also contain similar annual filing requirements for

national securities associations69 and the MSRB.70

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\6\7Exchange Act Rule 6a-2, 17 CFR 240.6a-2. These filings are

submitted on Exchange Act Form 1-A, 17 CFR 249.1a.

\6\8Rule 6a-2(b) also requires the filing of complete sets of

the constitution, by-laws, rules, and related documents of the

exchange, but only once every three years.

\6\9See Exchange Act Rule 15Aj-1, 17 CFR 240.15Aj-1; Form X-

15AJ-2, 17 CFR 249.803. Currently, the NASD is the only national

securities association registered with the Commission.

\7\0See Exchange Act Rule 17a-21, 17 CFR 240.17a-21.

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In the Proposing Release, the Commission stated that some of this

information is either publicly available, becomes available to the

Commission through other means, or is not useful enough to justify the

burden placed on the exchanges in collecting and filing it with the

Commission each year. The Commission thus proposed amendments to

streamline and conform the annual filing requirements for SROs.

A. Rule 6a-2: Annual Filing Requirements of Exchanges

The proposed amendments would eliminate or reduce the annual filing

requirement for certain information, and give exchanges flexibility in

making their filings. Commenters supported this proposal. The NYSE

suggested that the Commission adopt more extensive amendments that

would relieve SROs of the need to file any information annually that is

made available to the Commission throughout the year in periodic

publications, such as an exchange's bulletins and information memos.

The Commission has determined to adopt the amendments to Rule 6a-2

as proposed, with the exception of one minor modification concerning

the proposal to add the date of election to membership for each member,

discussed below at Section III.B. The amendments to Rule 6a-2 will

eliminate or reduce the information required to be filed annually in

the following exhibits to exchange registration: Exhibit B (forms

pertaining to application for membership and approval as a person

associated with a member); Exhibit C (forms of financial statements,

reports, or questionnaires relating to financial responsibility);

Exhibit D (documents comprising listing applications including

agreements required in connection therewith, and a schedule of listing

fees); Exhibit I (list of all individual members and related

information); Exhibit J (certain information related to a list of all

member organizations of the exchange); and Exhibit K (schedule of

securities listed on the exchange).

In addition, the amendments to Rule 6a-2 would provide the

following alternatives to the annual filing requirement for the

remaining exhibits to exchange registration other than Exhibits E and F

(i.e., Exhibits A(1), A(2), A(3), G, H, J, L, and M).71 Exchanges

would have the option, in lieu of the annual filing, to publish or

cooperate in the publication of this information on an annual or more

frequent basis, and to certify to the accuracy of the information.

Exchanges would have the additional option of keeping the information

in Exhibits A(1), A(2), A(3), L, and M up to date, and certifying that

the information is up to date and available to the Commission and the

public upon request.

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\7\1Exhibit A(1) contains the constitution, articles of

incorporation, by-laws, and rules of the exchange; Exhibit A(2)

contains written rulings, settled practices, and interpretations not

contained in A(1); Exhibit A(3) contains the constitution, articles

of incorporation, by-laws, and rules of each affiliate or subsidiary

of the exchange; Exhibit G contains a list of officers and committee

members; Exhibit H contains similar information for affiliates or

subsidiaries; Exhibit L contains a schedule of securities admitted

to unlisted trading practices; and Exhibit M contains a schedule of

unregistered securities admitted to trading on the exchange that are

exempt from registration.

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In response to the recommendation that SROs be relieved of the need

to file altogether any information that may be available to the

Commission, the Commission believes that it would be inconsistent with

the requirements of Section 6 of the Exchange Act to rely upon

informal, piecemeal publications as a surrogate for a comprehensive

filing that is a component of an exchange's registration with the

Commission. Furthermore, some of the required exhibits deal with

financial information of the exchange that enable the Commission to

comply with its obligations to provide Congress with a statement and

analysis of the expenses and operations of each SRO.72

---------------------------------------------------------------------------

\7\2See Exchange Act Sec. 23(b), 15 U.S.C. 78w(b).

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B. Rule 15Aj-1 and Form X-15AJ-2; Rule 17a-21: Annual Filing

Requirements for Securities Associations and Reports of the Municipal

Securities Rulemaking Board

Both the NASD and the MSRB endorsed the proposal to streamline

their annual filing requirements and conform them to the requirements

now applicable to exchanges.73 The Commission is adopting

amendments to Rules 15Aj-1, 17a-21, and Form X-15AJ-2 under the

Exchange Act to streamline the annual filing requirements for the NASD

and MSRB and make them more uniform. Like exchanges, these SROs will

have similar alternative options for the filing of comparable

information.

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\7\3In its comment letter, the NASD also recommended that the

Commission review the filing requirements applicable to exclusive

securities information processors (``SIPs''), similarly to eliminate

obsolete or duplicate filing requirements. This suggestion is

outside the scope of the original proposal. Nevertheless, the

Commission intends to review and streamline the annual filing

requirements applicable to exclusive SIPs.

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With respect to the proposal to add the date of election to

membership for each member, the NASD commented that in some cases this

date is not readily available and may be difficult to report. While the

Commission is adopting the requirement to add the date of election to

membership for each member, this information will be required only for

those members elected to membership after December 31, 1994. A

conforming modification also has been made to Rule 6a-2 for exchanges,

thus applying the same standard to all SROs. This information serves an

important purpose by enabling Commission staff to monitor the

obligation of broker-dealers to become members of an SRO,74 and

designate an appropriate designated examining authority for member

broker-dealers.75

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\7\4Exchange Act Sec. 15(b)(8), 15 U.S.C. 78o(b)(8). The

importance of this information is also highlighted by Exchange Act

Sec. 15(b)(1)(B), 15 U.S.C. 78o(b)(1)(B), as amended by the

Government Securities Act Amendments of 1993, Pub. L. No. 103-202,

107 Stat. 2345 (1993), which conditions the effectiveness of broker-

dealer registration with the Commission on such SRO membership.

\7\5Where a broker-dealer is a member of more than one SRO, the

Commission has authority to designate to one SRO the responsibility

for examining the member for compliance with applicable financial

responsibility rules. Exchange Act Sec. 17(d)(1), 15 U.S.C.

78q(d)(1); 17 CFR 240.17d-1.

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IV. Effects on Competition and Regulatory Flexibility Act

Considerations

Section 23(a)76 of the Act requires the Commission, in

adopting rules under the Act, to consider the impact on competition of

those rules, if any, and to balance that impact against the regulatory

benefits gained in terms of furthering the purposes of the Act. The

amendments to Rule 19b-4 apply to all SROs. Furthermore, the amendments

are intended to expedite for all SROs a process to which they already

are subject under the Act. Similarly, the amendments to the annual

filing requirements for SROs are designed to streamline and make

uniform those requirements. The Commission is of the view, therefore,

that adoption of the proposed amendments to Rules 19b-4, 6a-2, 15Aj-1,

17a-21, and Forms 19b-4 and X-15AJ-2 would not impose any burden on

competition not necessary or appropriate in furtherance of the purposes

of the Act.

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\7\615 U.S.C. 78w(a)(2).

---------------------------------------------------------------------------

In addition, Section 3(a) of the Regulatory Flexibility Act77

requires the Commission to undertake an initial regulatory flexibility

analysis of the proposed amendments on small entities unless the

Chairman certifies that the rule, if adopted, would not have a

significant economic impact on a substantial number of small

entities.78 Rule 19b-4 and Form 19b-4 apply only to SROs. Rule 6a-

2 applies only to national securities exchanges. Rule 15Aj-1 and Form

X-15AJ-2 apply only to national securities associations. Rule 17a-21

applies only to the MSRB. Furthermore, the proposed amendments are

intended to streamline a process to which these SROs already are

subject. In the Proposing Release, the Commission indicated that the

Chairman has certified that the amendments to Rule 19b-4, Form 19b-4,

and Rule 6a-2 would not have a significant economic impact on a

substantial number of small entities. The Commission did not receive

any comments on the regulatory flexibility certification. The Chairman

also has certified that the amendments to Rules 15Aj-1 and 17a-21, and

Form X-15AJ-2 would not have a significant economic impact on a

substantial number of small entities. This certification, including the

reasons therefore, is attached as Appendix A to this release.

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\7\75 U.S.C. 603(a).

\7\85 U.S.C. 605(b).

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List of Subjects

17 CFR Part 200

Administrative practice and procedure, Authority delegations

(Government agencies), Organizations and functions (Government

organizations).

17 CFR Parts 240 and 249

Reporting and recordkeeping requirements, Securities.

Statutory Basis and Text of Proposed Amendments

In accordance with the foregoing, Title 17, Chapter II of the Code

of Federal Regulations is amended as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND

REQUESTS

1. The authority citation for Part 200, subpart A continues to read

in part as follows:

Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 79t,

77sss, 80a-37, 80b-11, unless otherwise noted.

* * * * *

2. Section 200.30-3 is amended by adding paragraphs (a)(57),

(a)(58), and (a)(59) to read as follows:

Sec. 200.30-3 Delegation of authority to Director of Division of

Market Regulation.

* * * * *

(a) * * *

(57) Pursuant to Section 19(b)(2)(B) of the Act, 15 U.S.C.

78s(b)(2)(B), to institute proceedings to determine whether a proposed

rule change of a self-regulatory organization should be disapproved.

(58) Pursuant to Section 19(b)(3)(C) of the Act, 15 U.S.C.

78s(b)(3)(C), to abrogate a change in the rules of a self-regulatory

organization and require that it be refiled in accordance with Section

19(b)(1), 15 U.S.C. 78s(b)(1), and reviewed in accordance with Section

19(b)(2), 15 U.S.C. 78s(b)(2), of the Act.

(59) Pursuant to paragraph (e)(6)(iii) of Rule 19b-4 (Sec. 240.19b-

4 of this chapter), to reduce the period before which a proposed rule

change can become operative, and to reduce the period between an SRO

submission of a filing and a pre-filing notification.

* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF

1934

3. The authority citation for Part 240 continues to read in part as

follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg,

77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p,

78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-

37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.

* * * * *

Sec. 2640.6a-2 [Amended]

4. Paragraph (a)(1) of Sec. 240.6a-2 is amended by removing ``, or

in Exhibits B, C and D,'' and ``and Exhibits B, C and D''.

5. Revise paragraph (a)(3) of Sec. 240.6a-2 to read as follows:

Sec. 240.6a-2 Periodic amendments to registration statements or

exemption statements of exchanges.

(a) * * *

(3) Complete Exhibits G, H, J, L and M, which shall be up to date

as of the latest practicable date within 3 months of the date on which

the annual amendment is filed, except that:

(i) Exhibit J need only contain the name and principal place of

business of each member organization, and for each member organization

elected to membership after December 31, 1994, the date of election to

membership;

(ii) If a national securities exchange publishes or cooperates in

the publication of the information required in these exhibits on an

annual or more frequent basis, in lieu of filing such an exhibit a

national securities exchange may:

(A) Identify the publication in which such information is

available, the name, address, and telephone number of the person from

whom such publication may be obtained, and the price thereof; and

(B) Certify to the accuracy of such information as of its date;

(iii) If a national securities exchange keeps the information

required in Exhibits L and M up to date and makes it available to the

Commission and the public on request, in lieu of filing such an

exhibit, a national securities exchange may certify that the

information is kept up to date and is available to the Commission and

the public upon request.

* * * * *

6. Section 240.6a-2 is amended by revising paragraph (b) to read as

follows:

Sec. 240.6a-2 Periodic amendments to registration statements or

exemption statements of exchanges.

* * * * *

(b) Unless exempted pursuant to paragraph (c) of this section, on

or before June 30, 1983, and every three years thereafter each exchange

registered as a national securities exchange shall file complete

Exhibits A(1), A(2) and A(3) to its registration statement, which shall

be up to date as of the latest practicable date within 3 months of the

date on which these exhibits are filed, except that:

(1) If a national securities exchange publishes or cooperates in

the publication of the information required in these exhibits on an

annual or more frequent basis, in lieu of filing such an exhibit a

national securities exchange may:

(i) Identify the publication in which such information is

available, the name, address, and telephone number of the person from

whom such publication may be obtained, and the price thereof; and

(ii) Certify to the accuracy of such information as of its date;

(2) If a national securities exchange keeps the information

required in these exhibits up to date and makes it available to the

Commission and the public on request, in lieu of filing such an

exhibit, a national securities exchange may certify that the

information is kept up to date and is available to the Commission and

the public upon request.

* * * * *

7. Paragraph (c)(1) of Sec. 240.15Aj-1 is revised to read as

follows:

Sec. 240.15Aj-1 Amendments and supplements to registration statements

of securities associations.

* * * * *

(c) Annual supplements. (1) Promptly after March 1 of each year,

the association shall file with the Commission an annual consolidated

supplement as of such date on Form X-15AJ-2 (Sec. 249.803) except that:

(i) If the securities association publishes or cooperates in the

publication of the information required in Items 6(a) and 6(b) of Form

X-15AJ-2 on an annual or more frequent basis, in lieu of filing such an

item the securities association may:

(A) Identify the publication in which such information is

available, the name, address, and telephone number of the person from

whom such publication may be obtained, and the price thereof; and

(B) Certify to the accuracy of such information as of its date.

(ii) Promptly after March 1, 1995, and every three years thereafter

each association shall file complete Exhibit A to Form X-15AJ-2. The

information contained in this exhibit shall be up to date as of the

latest practicable date within 3 months of the date on which these

exhibits are filed. If the association publishes or cooperates in the

publication of the information required in this exhibit on an annual or

more frequent basis, in lieu of filing such exhibit the association

may:

(A) Identify the publication in which such information is

available, the name, address, and telephone number of the person from

whom such publication may be obtained, and the price thereof; and

(B) Certify to the accuracy of such information as of its date. If

a securities association keeps the information required in this exhibit

up to date and makes it available to the Commission and the public upon

request, in lieu of filing such an exhibit a securities association may

certify that the information is kept up to date and is available to the

Commission and the public upon request.

* * * * *

8. By revising paragraph (a)(4) of Sec. 240.17a-21 to read as

follows:

Sec. 240.17a-21 Reports of the Municipal Securities Rulemaking Board.

(a) * * *

(4) The Municipal Securities Rulemaking Board shall include in its

annual report a statement and an analysis of its expenses and

operations including:

(i) A balance sheet as of the end of the period covered by the

report and a statement of revenues and expenses for the Board for that

period;

(ii) The rules of the Board including any written interpretations

of the rules or staff interpretive letters, except that this

information may be included in the annual report once every three years

and shall be up to date as of the latest practicable date within 3

months of the date on which this information is filed. If the Board

publishes or cooperates in the publication of this information on an

annual or more frequent basis, in lieu of including such information in

the annual report the Board may:

(A) Identify the publication in which such information is

available, the name, address, and telephone number of the person from

whom such publication may be obtained, and the price thereof; and

(B) Certify to the accuracy of such information as of its date. If

the Board keeps this information up to date and makes it available to

the Commission and the public upon request, in lieu of filing such

information the Board may certify that the information is kept up to

date and is available to the Commission and the public upon request;

(iii) The following information concerning members of the Board:

(A) Name;

(B) Dates of commencement and termination of present term of

office;

(C) Length of time each member has held such office;

(D) Name of principal organization with which connected;

(E) Title; and

(F) City wherein the principal office of such organization is

located;

(iv) Address of the Board, the name and address of each person

authorized to receive notices on behalf of the Board from the

Commission, and the name and address of counsel to the Board, if any;

and

(v) A list, including addresses, as of the latest practicable date,

alphabetically arranged, of all municipal securities brokers and

municipal securities dealers which have paid to the Board fees and

charges to defray the costs and expenses of operating the Board.

* * * * *

9. Paragraph (e) of Sec. 240.19b-4 is revised to read as follows:

Sec. 240.19b-4 Filings with respect to proposed rule changes by self-

regulatory organizations.

* * * * *

(e) A proposed rule change may take effect upon filing with the

Commission pursuant to Section 19(b)(3)(A) of the Act, 15 U.S.C.

78s(b)(3)(A), if properly designated by the self-regulatory

organization as:

(1) Constituting a stated policy, practice, or interpretation with

respect to the meaning, administration, or enforcement of an existing

rule;

(2) Establishing or changing a due, fee, or other charge;

(3) Concerned solely with the administration of the self-regulatory

organization;

(4) Effecting a change in an existing service of a registered

clearing agency that:

(i) Does not adversely affect the safeguarding of securities or

funds in the custody or control of the clearing agency or for which it

is responsible; and

(ii) Does not significantly affect the respective rights or

obligations of the clearing agency or persons using the service;

(5) Effecting a change in an existing order-entry or trading system

of a self-regulatory organization that:

(i) Does not significantly affect the protection of investors or

the public interest;

(ii) Does not impose any significant burden on competition; and

(iii) Does not have the effect of limiting the access to or

availability of the system; or

(6) Effecting a change that:

(i) Does not significantly affect the protection of investors or

the public interest;

(ii) Does not impose any significant burden on competition; and

(iii) By its terms, does not become operative for 30 days after the

date of the filing, or such shorter time as the Commission may

designate if consistent with the protection of investors and the public

interest; provided that the self-regulatory organization has given the

Commission written notice of its intent to file the proposed rule

change, along with a brief description and text of the proposed rule

change, at least five business days prior to the date of filing of the

proposed rule change, or such shorter time as designated by the

Commission.

* * * * *

PART 249--FORM, SECURITIES EXCHANGE ACT OF 1934

10. The authority citation for Part 249 continues to read in part

as follows:

Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;

* * * * *

Sec. 249.803 [Amended]

11. Form X-15AJ-2 (referenced in Sec. 249.803) is amended by

removing items numbered 7 through 28 and redesignating item 29 as

number 7.

Note: Form X-15AJ-2 does not and these amendments will not

appear in the Code of Federal Regulations.

Sec. 249.803 [Amended]

12. Form X-15AJ-2 (referenced in Sec. 249.803) is amended by

revising Exhibit C to reads as follows:

Note: Form X-15AJ-2 does not and these amendments will not

appear in the Code of Federal Regulations.

Form X-15AJ-2

* * * * *

Exhibits to be Furnished With This Supplement

* * * * *

Exhibit C. A list, as of latest practicable date, alphabetically

arranged, of all members of the association indicating for each--

(1) the name;

(2) the principal place of business; and

(3) the date of election to membership for each member elected

to membership after December 31, 1994.

Sec. 249.819 [Amended]

13. By revising the first sentence of instruction F of the general

instructions of Form 19b-4 (referenced in Sec. 249.819) to read as

follows, and by removing the asterisk contained therein along with its

accompanying footnote:

Note: Form 19b-4 does not and these amendments will not appear

in the Code of Federal Regulations.

Form 19b-4

* * * * *

General Instructions

* * * * *

F. Signature and Filing of the Completed Form

Nine copies of Form 19b-4, nine copies of Exhibit 1, four copies

of Exhibits 2 and 3, and two copies of Exhibit 4 shall be filed

with, in the case of filings by securities exchanges, the Assistant

Director for Derivatives and Exchange Oversight, in the case of

filings by securities associations or the Municipal Securities

Rulemaking Board, the Assistant Director for NMS and OTC, and in the

case of filings by clearing agencies, the Assistant Director for

Securities Processing, Division of Market Regulation, Securities and

Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549.

* * *

* * * * *

Sec. 249.819 [Amended]

14. Item 7 of the Information to Be Included in the Completed Form

of Form 19b-4 (referenced in Sec. 249.819) is amended by removing the

word ``or'' from the end of paragraph (b)(iii) and adding paragraphs

(b)(v) and (b)(vi) to read as follows:

Note: Form 19b-4 does not and these amendments will not appear

in the Code of Federal Regulations.

Form 19b-4

* * * * *

7. Basis for Summary Effectiveness Pursuant to Section 19(b)(3)

or for Accelerated Effectiveness Pursuant to Section 19(b)(2).

* * * * *

(b) * * *

(v) effects a change in an existing order-entry or trading

system of a self-regulatory organization that (A) does not

significantly affect the protection of investors or the public

interest; (B) does not impose any significant burden on competition;

and (C) does not have the effect of limiting the access to or

availability of the system, or

(vi) effects a change that (A) does not significantly affect the

protection of investors or the public interest; (B) does not impose

any significant burden on competition; and (C) by its terms, does

not become operative for 30 days after the date of the filing, or

such shorter time as the Commission may designate if consistent with

the protection of investors and the public interest; provided that

the self-regulatory organization has given the Commission written

notice of its intent to file the proposed rule change, along with a

brief description and text of the proposed rule change, at least

five business days prior to the date of filing of the proposed rule

change, or such shorter time as designated by the Commission. If it

is requested that the proposed rule change become operative in less

than 30 days, provide a statement explaining why the Commission

should shorten this time period.

* * * * *

Sec. 249.819 [Amended]

15. Section IV of Exhibit 1 of Form 19b-4 (referenced in

Sec. 249.819) is amended by removing ``500 North Capitol Street,'' and

adding in its place ``450 Fifth Street, N.W.,'' and removing ``Public

Reference Section, 1100 L Street N.W.,'' and adding in its place

``Public Reference Room in''.

Note: Form 19b-4 does not and these amendments will not appear

in the Code of Federal Regulations.

By the Commission.

Dated: December 20, 1994.

Margaret H. McFarland,

Deputy Secretary.

Note: This Appendix to the Preamble will not appear in the Code

of Federal Regulations

Appendix A

Securities and Exchange Commission Regulatory Flexibility Act

Certification

I Arthur Levitt, Chairman of the Securities and Exchange

Commission, hereby certify pursuant to 5 U.S.C. 605(b) that proposed

amendments to Rules 15Aj-1 and 17a-21, and Form X-15AJ-2 under the

Securities Exchange Act of 1934 set forth in Securities Exchange Act

Release No. 35123, if promulgated, will not have a significant economic

impact on a substantial number of small entities. The reason for this

certification is that the rules and form apply only to the National

Association of Securities Dealers and the Municipal Securities

Rulemaking Board, and consequently would not impose any significant

economic impact on a substantial number of small entities, as that term

is defined under the Regulatory Flexibility Act. Furthermore, the

proposed amendments are intended to streamline a process to which these

self-regulatory organizations already are subject.

Dated: December 20, 1994.

Arthur Levitt,

Chairman.

[FR Doc. 94-31657 Filed 12-27-94; 8:45 am]

BILLING CODE 8010-01-P