Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Filing and Order Granting Accelerated Approval of a Proposed Rule Change

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35133; File No. SR-NASD-94-63]

Self-Regulatory Organizations; National Association of Securities

Dealers, Inc.; Filing and Order Granting Accelerated Approval of a

Proposed Rule Change

December 21, 1994.

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

(``Act''),\1\ notice is hereby given that on November 23, 1994, 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 and II below, which Items have been

prepared by the NASD. The Commission is publishing this notice to

solicit comments on the proposed rule change from interested persons.

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\1\15 U.S.C. 78s(b)(1).

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

of the Proposed Rule Change

The NASD is proposing to amend its Policy Statement on Market

Closings (``Statement'' or ``Policy Statement''), adopted pursuant to

Article VII, Section 3 of the NASD By-Laws,\2\ to extend its expiration

date on year to December 31, 1995. No other terms of the Policy

Statement are proposed to be amended.

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\2\NASD Manual, By-Laws, Art. VII, Sec. 3, (CCH) 1182A.

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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 Policy Statement was adopted as a rule proposal of the NASD

under Article VII, Section 3 of the NASD By-Laws. The Statement

provides the NASD with authority, acting through a designated committee

of the Board of Governors, to take appropriate action in the event of

an emergency or extraordinary market conditions. Article VII, Section 3

was adopted by the NASD as a result of the events of October 1987. The

provision was drafted to enable the NASD to respond to future crises

with a maximum degree of flexibility, providing properly tailored

responses to varying situations.\3\

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\3\The Release approving the Policy Statement stated that ``the

Commission believes the proposal provides the NASD with the

flexibility to deal with extraordinary market conditions such as

existed in October, 1987.'' Securities Exchange Act Release No.

26072 (September 12, 1988), 53 FR 36143.

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The Commission requested the NASD to express its views on the

``circuit breaker'' proposal of the President's Working Group on

Financial Markets, and the Policy Statement was adopted in response to

that request. The Policy Statement was approved on October 19, 1988.\4\

As originally approved, the Policy Statement was to expire December 31,

1989, unless modified or extended before then by the NASD. The

expiration date of the Policy Statement has been extended a number of

times.\5\

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\4\See Securities Exchange Act Release No. 26198 (October 19,

1988), 53 FR 41673.

\5\Securities Exchange Act Release Nos. 27370, (October 23,

1989), 54 FR 43881 (approving File No. SR-NASD-89-46, extending

expiration date through December 31, 1990); 28694 (December 12,

1990), 55 FR 52119 (approving File No. SR-NASD-90-60, extending

expiration date through December 31, 1991); 30113 (December 20,

1991), 56 FR 67341 (File No. SR-NASD-91-70, extending expiration

date through January 31, 1992); 30304 (January 29, 1992), 57 FR 4658

(approving File No. SR-NASD-92-02, extending expiration date through

December 31, 1993); and 33292 (December 6, 1993), 58 FR 65214 (File

No. SR-NASD-93-70, extending expiration date through December 31,

1994).

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The Policy Statement expresses the views of the NASD Board of

Governors as of July 16, 1993 concerning progress made on the numerous

proposals emanating from the October 1987 crisis. From time to time,

the Board will review progress made on the recommendations set forth in

the Statement as well as other developments as they may occur. The

views of the Board may change and the NASD may modify or amplify the

Statement accordingly. It should also be noted that the Policy

Statement sets forth the NASD's proposed response to a specific set of

circumstances. The Statement does not in any way preclude the NASD from

taking any other action that may be appropriate under other

circumstances. The NASD is proposing to extend the expiration date of

the Policy Statement for one year to December 31, 1995 The NASD is

concerned regarding the diminishing percentage relationship between the

250 and 400 point thresholds and the increasing level of the Dow Jones

Industrial Average. It is the intention of the NASD to reevaluate the

thresholds in the Policy Statement.

The NASD believes the proposed rule change is consistent with the

provisions of Section 15A(b)(6) of the Act, as the Policy Statement is

designed to foster cooperation and coordination with the Commission and

the other self-regulatory organizations engaged in regulating the

United States securities markets.

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 NASD has requested that the Commission find good cause pursuant

to Section 19(b)(2) for approving the proposed rule change prior to the

thirtieth day after publication in the Federal Register. In support of

its request, the NASD stated that the Policy Statement will expire on

December 31, 1994 unless the proposed rule change is approved prior

thereto, and that the proposed rule change merely extends the Policy

Statement and makes no other change to the terms of the Policy

Statement. Moreover, no public comments have been received in response

to the prior publications for comment of the NASD's proposals extending

the Policy Statement.

The Commission finds that the proposed rule change is consistent

with the requirements of the Act and the rules and regulations

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

of Section 15A and the rules and regulations thereunder. Since the

Commission approved the NASD's proposal in 1988, the Dow Jones

Industrial Average has not experienced a one day market decline that

would trigger a market halt. Nevertheless, the Commission continues to

believe that circuit breaker procedures are desirable to deal with

potential strains that may develop during periods of extreme market

volatility, and, accordingly, the Commission believes that the pilot

program should be extended. The Commission also believes that circuit

breakers represent a reasonable means to retard a rapid one day market

decline that can have a destabilizing effect on the nation's financial

markets and participants in these markets.

The Commission finds good cause for approving the proposed rule

change prior to the thirtieth day after the date of publication of

notice of filing thereof in the Federal Register because there are no

changes being made to the current provisions, which originally were

subject to the full notice and comment procedures, and accelerated

approval would enable the Policy Statement to continue uninterrupted.

The Commission believes, therefore, that granting accelerated approval

of the proposed rule change is appropriate and consistent with Sections

15A and 19(b) of the Act.\6\

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\6\The Commission reaffirms its request that the NASD implement

its Policy Statement by implementing a trading halt as quickly as

practicable whenever the New York Stock Exchange and other equity

markets have suspended trading. See Securities Exchange Act Release

No. 27370, supra note 5.

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IV. Solicitation of Comments

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

arguments concerning the foregoing. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

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

Copies of the submissions, 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 January 19, 1995.

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

Act,\7\ that the proposed rule change (SR-NASD-94-63) is hereby

approved until December 31, 1995.

\7\15 U.S.C. 78s(b)(2) (1988).

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For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\8\

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\8\17 CFR 200.30-3(a)(12) (1993).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-31995 Filed 12-28-94; 8:45 am]

BILLING CODE 8010-01-M