Self-Regulatory Organizations; Notice of Proposed Rule Change by the National Association of Securities Dealers, Inc., Relating to a Six Month Extension of the SOES Minimum Exposure Limit Rule and the SOES Automated Quotation Update Feature

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35364; File No. SR-NASD-95-8]

Self-Regulatory Organizations; Notice of Proposed Rule Change by

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

Month Extension of the SOES Minimum Exposure Limit Rule and the SOES

Automated Quotation Update Feature

February 13, 1995.

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

(``Act''),\1\ notice is hereby given that on February 10, 1995, the

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

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

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

Items I, II, and III below, which Items have been prepared by the NASD.

The Commission in publishing this notice to solicit comments on the

proposed rule change from interested persons.

\1\15 U.S.C. 78s(b)(1) (1988).

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

of the Proposed Rule Change

The NASD proposed to extend, until October 2, 1995, the

effectiveness of certain rules governing the operation of The Nasdaq

Stock Market, Inc.'s (``Nasdaq'') Small Order Execution System

(``SOES''). Specifically, these SOES rules, which were previously

approved by the Commission on a pilot basis on December 23, 1993\2\ and

recently extended through March 27, 1995,\3\ provide for: (1) a

reduction in the minimum exposure limit for unpreferenced SOES orders

from five times the maximum order size to two times the maximum order

size, and for the elimination of exposure limits for preferenced orders

(``SOES Minimum [[Page 9705]] Exposure Limit Rule''); and (2)

implementation of an automated function for updating market maker

quotations when the market maker's exposure limit has been exhausted

(``SOES Automated Quotation Update Feature''). These rules are part of

a set of SOES rules approved by the SEC on a pilot basis known as the

Interim SOES Rules.\4\

\2\See Securities Exchange Act Release No. 33377 (Dec. 23,

1993), 58 FR 69419 (Dec. 30, 1993) (``Interim SOES Rules Approval

Order'').

\3\See Securities Exchange Act Release No. 35275 (Jan. 25,

1995), 60 FR 6327 (Feb. 1, 1995) (``Interim SOES Rules Extension

Order'').

\4\As first approved by the Commission on December 23, 1993, the

Interim SOES Rules had four components: (1) The SOES minimum

Exposure Limit; (2) the Automated Quotation Update; (3) a reduction

in the maximum size order eligible for execution through SOES from

1,000 shares to 500 shares (``SOES Maximum Order Size''); and (4)

the prohibition of short sales through SOES. In light of the SEC's

approval of the NASD's short sale rule in June 1994, the NASD did

not seek to extend the prohibition against the entry of short sales

into SOES. Absent SEC approval of an extension of the effectiveness

of the SOES Maximum Order Size rule, the rule will lapse effective

March 28, 1995.

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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

On December 23, 1993, the SEC issued an order approving the Interim

SOES Rules on a one-year pilot basis effective January 7, 1994. In

response to two applications requesting a stay of the Interim SOES

Rules Approval Order, however, the SEC granted a partial stay of the

effective date of the order through January 25, 1994. Thus, absent

further Commission action, the Interim SOES Rules initially were

effective from January 26, 1994 through January 25, 1995.\5\ On January

25, 1995, the SEC approval an NASD proposal to extend the effectiveness

of the Interim SOES Rules through March 27, 1995.\6\

\5\Securities Exchange Act Release No. 33377 (Dec. 23, 1993), 58

FR 69419 (Dec. 30, 1993) (approving the Interim SOES Rules on a one-

year pilot basis effective January 7, 1994). See also Securities

Exchange Act Release No. 33424 (Jan. 5, 1994) (order denying stay

and granting interim stay through January 25, 1994) and Securities

Exchange Act Release No. 33635 (Feb. 17, 1994) (order denying

renewed application for stay).

\6\See SOES Interim Rules Extension Order, supra note 3.

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As described in more detail below, because the NASD believes

implementation of the SOES Minimum Exposure Limit rule and the SOES

Automated Quotation Update Feature have been associated with positive

developments in the markets for Nasdaq securities and clearly have not

had any negative effect on market quality, the NASD believes it is

appropriate and consistent with the maintenance of fair and orderly

markets and the protection of investors to extend the effectiveness of

these rules. In addition, consistent with the termination of the

Interim SOES Rule that prohibited the entry of short sales into SOES,

the NASD believes its instant proposal to continue the effectiveness of

some but not all of the original components of the Interim SOES Rules

is appropriate and consistent with the Act. While the NASD believes the

Interim SOES Rules collectively have had a beneficial impact on the

market, the NASD also believes that each of the Interim SOES Rules has

individually had a benefit on the market. Thus, each one of the Interim

SOES Rules can be evaluated for consistency with the Act independent of

the others. The SOES Minimum Exposure Limit rule and the SOES Automated

Quotation Update Feature reflect a reasoned approach by the NASD to

address the adverse effects on market liquidity attributable to active

intra-day trading activity through SOES, while at the same time not

compromising the ability of small, retail investors to receive

immediate executions through SOES. Specifically, these rules are

designed to address concerns that concentrated, aggressive use of SOES

by a growing number of order entry firms has resulted in increased

volatility in quotations and transaction prices, wide spreads, and the

loss of liquidity for individual and institutional investor orders.

The NASD believes that the same arguments and justifications made

by the NASD in support of approval of the SOES Minimum Exposure Limit

rule and the SOES Automated Quotation Update Feature are just as

compelling today as they were when the SEC relied on them to initially

approve the rules. In sum, the NASD continues to believe that

concentrated bursts of SOES activity by active order-entry firms

contributed to increased short-term volatility, wider spreads, and less

market liquidity on Nasdaq and that the SOES Minimum Exposure Limit

rule and the SOES Automated Quotation Update Feature are an effective

means to minimize these adverse market impacts.

The NASD also notes that the SEC made specific findings in the

Interim SOES Rules Approval Order that the SOES Minimum Exposure Limit

rule and the SOES Automated Quotation Update Feature were consistent

with the Act. In particular, the SEC stated in its approval order that:

a. Because the benefits for market quality of restricting SOES

usage outweigh any potential decrease in pricing efficiency, the

Commission concludes that the net effect of the proposal is to

remove impediments to the mechanism of a free and open market and a

national market system, and to protect investors and the public

interest, and that the proposed rule changes are designed to produce

accurate quotations, consistent with Section 15A(b)(6) and

16A(b)(11) of the Act. In addition, the Commission concludes that

the benefits of the proposal in terms of preserving market quality

and preserving the operational efficiencies of SOES for the

processing of small size retail orders outweigh any potential burden

on competition or costs to customers or broker-dealers affected

adversely by the proposal. Thus, the Commission concludes that the

proposal is consistent with Section 15A(b)(9) of the Act in that it

does not impose a burden on competition which is not necessary or

appropriate in furtherance of the purposes of the Act.\7\

\7\Interim SOES Rules Approval Order, supra note 2, 58 FR at

69423 (footnote omitted).

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b. The Commission also concludes that the proposal advances the

objectives of Section 11A of the Act. Section 11A provides that it

is in the public interest and appropriate for the protection of

investors and the maintenance of fair and orderly markets to assure

economically efficient execution of securities transactions, fair

competition among market participants, and the practicality of

brokers executing orders in the best market. The Commission

concludes that the proposal furthers these objectives by preserving

the operational efficiencies of SOES for the processing of small

orders from retail investors.\8\

\8\Id. (footnote omitted).

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c. The Commission believes that it is appropriate to restrict

trading practices through SOES that impose excessive risks and costs

on market makers and jeopardize market quality, and which do not

provide significant contributions to liquidity or pricing

efficiency. * * * The Commission believes that it is more important

to ensure that investors seeking to establish or liquidate an

inventory position have ready access to a liquid Nasdaq market and

SOES than to protect the ability of customers to use SOES for intra-

day trading strategies.\9\

\9\Id. at 69424-25.

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d. The Commission believes that there are increased costs

associated with active intra-day trading activity through SOES that

undermine Nasdaq market quality * * * Active intra-day trading

activity through SOES can also contribute to instability in the

market. * * *\10\

\10\Id. (footnote omitted).

e. In addition, these waves of executions can make it difficult

to maintain orderly markets. Given the increased volatility

[[Page 9706]] associated with these waves of intra-day trading

activity, market makers are subject to increased risks that

concentrated waves of orders will cause the market to move away. As

a result, individual market makers may be unwilling to narrow the

current spread and commit additional capital to the market by

raising the bid or lowering the offer. When market makers commit

less capital and quote less competitive markets, prices can be

expected to deteriorate more rapidly. Accordingly, the Commission

believes that it is appropriate for the NASD to take measured steps

to redress the economic incentives for frequent intra-day trading

inherent in SOES to prevent SOES activity from having a negative

effect on market prices and volatility.\11\

\11\Id. at 69424-26 (footnote omitted).

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f. The Commission does not believe that intra-day trading

strategies through SOES contribute significantly to market

efficiency in the sense of causing prices to reflect information

more accurately.\12\

\12\Id.

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g. The Commission has evaluated each of the proposed

modifications to SOES, and concludes that each of the modifications

reduces the adverse effects of active trading through SOES and

better enables market makers to manage risk while maintaining

continuous participation in SOES. In addition, the Commission does

not believe that any of the modifications will have a significant

negative effect on market quality. To the extent that any of the

modifications may result in a potential loss of liquidity for small

investor orders, the Commission believes that these reductions are

marginal and are outweighed by the benefits of preserving market

maker participation in SOES and increasing the quality of executions

for public and institutional orders as a result of the

modifications.\13\

\13\Id.

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h. The Commission * * * has determined that the instant

modifications to SOES further objectives of investor protection and

fair and orderly markets, and that these goals, on balance, outweigh

any marginal effects on liquidity for small retail orders, and any

anti-competitive effects on order entry firms and their customers.

The Commission concludes that the ability of active traders to place

trades through a system designed for retail investors can impair

market efficiency and jeopardize the level of market making capital

devoted to Nasdaq issues. The Commission believes that the rule

change is an appropriate response to active trading through SOES,

and that the modifications will reduce the effects of concentrated

intra-day SOES activity on the market.\14\

\14\Id. at 69429.

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The NASD believes these significant statutory findings by the SEC

regarding the SOES Minimum Exposure Limit rule and the SOES Automated

Quotation Update Feature and the SEC's assessment of the likely

benefits to the marketplace that would result from the rules have been

confirmed and substantiated by econometric studies on the effectiveness

of the Interim SOES Rules conducted by the NASD's Economic Research

Department\5\ and an independent economist commissioned by the

NASD.\16\ When the SEC approved the Interim SOES Rules, it stated that

``[a]ny further action the NASD seeks with respect to SOES--extension

of these modifications upon expiration, or introduction of other

changes--will require independent consideration under Section 19 of the

Act.''\17\ In addition, the SEC stated that, should the NASD desire to

extend these SOES changes or modify SOES, the Commission would expect,

``the NASD to monitor the quality of its markets and assess the effects

of the approved SOES changes on market quality for Nasdaq securities.''

Also, if feasible, the SEC instructed the NASD to provide a

quantitative and statistical assessment of the effects of the SOES

changes on market quality; or, if an assessment is not feasible, the

SEC stated that the NASD should provide a reasoned explanation

supporting that determination.

\15\See letter from Gene Finn, Vice President & Chief Economist,

NASD, to Katherine England, Assistant Director, National Market

System & OTC Regulation, SEC, dated October 24, 1994 (letter

submitted in connection with the NASD's NPROVE filing, SR-

NASD-94-13).

\16\See The Association Between the Interim SOES Rules and

Nasdaq Market Quality, Dean Furbush, Ph.D., Economists, Inc.,

Washington D.C., December 30, 1994 (``Furbush Study'').

\17\Interim SOES Rules Approved Order, supra note 2, 59 FR at

69429.

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In sum, the NASD's study found that:

Since the SOES changes went into effect in January 1994,

the statistical evidence indicated that when average daily volume,

stock price, and stock price volatility are held constant through

regression techniques, quoted percentage spreads in Nasdaq securities

experienced a decline in the immediate period following implementation

of the changes and have continued to decline since then. The

statistical evidence also showed that the narrowing of quoted

percentage spreads became more pronounced and robust the longer the

Interim SOES Rules were in effect. In particular, quoted spreads in

cents per share for the 500 largest Nasdaq National Market securities

experienced a sharp decline from April 28 to May 12 and from June 23 to

July 18.\18\

\18\Some press reports have attributed the recent decline in

spreads for Nasdaq stocks to the publication, on May 26 and 27,

1994, of newspaper articles in The Wall Street Journal, The Los

Angeles Times and other publications reporting the results of an

economic study conducted by two academicians that illustrated the

lack of odd-eighth quotes for active Nasdaq stocks. Contrary to

these press reports, this study shows that spreads had indeed

narrowed before publication of these articles (from April 28 to May

12), stabilized at these narrower levels from mid-May until June 23,

and declined again from June 23 to July 18.

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With the exception of a brief, market-wide period of

volatility experienced by stocks traded on Nasdaq, the New York Stock

Exchange, and the American Stock Exchange during the Spring, the

volatility of Nasdaq securities appears to be unchanged in the period

following implementation of the changes; and

A smaller percentage of Nasdaq stocks experienced extreme

relative price volatility after implementation of the rules and that

these modifications, in turn, suggest a reduction in relative

volatilities since the rules were put into effect.

The Furbush Study also corroborated the findings of the NASD's

study. This study found that there was a statistically significant

improvement in effective spreads for the top 100 Nasdaq stocks (based

on dollar volume) during the three month period following

implementation of the rules. Moreover, the study also found that the

most significant improvement in effective spreads for the top 100

stocks occurred for trade sizes between 501 and 1,000 shares, precisely

the level that was made ineligible for SOES trading by the Interim SOES

Rules. In addition, the study found that the average number of market

makers for the top ten Nasdaq-listed stocks increased from 44.3 to

46.0, or 3.8 percent, and from 30.2 to 30.9 for the top 100 stocks, or

2.3 percent. Although correlation does not necessarily imply causation,

as noted by the SEC when it approved the Interim SOES Rules, the NASD

believes that positive market developments clearly have been associated

with implementation of the Interim SOES Rules.

The NASD also believes that these studies of the effectiveness of

the Interim SOES Rules lend credence to another NASD study that was

submitted to the SEC in support of approval of the Interim SOES

Rules.\19\ In the May 1993 SOES Study, the NASD found that concentrated

waves of orders entered into SOES by active order-entry firms resulted

in discernible degradation to the quality of the Nasdaq market.

Specifically, the study found, among other things, that: (1) bursts of

orders entered into SOES by active order entry firms frequently result

in a decline in the bid price and a widening of the bid-ask spread; (2)

there is a significant [[Page 9707]] positive relationship between

increases in spreads and volume attributable to active order-entry

firms as it related to total SOES volume per security; and (3) activity

by active order-entry firms resulted in higher price volatility and

less liquidity--higher price changes are associated with high active

trading firm volume, even after controlling for normal price

fluctuations.

\19\See 1NASD Department of Economic Research: Impact of SOES

Active Trading Firms on Nasdaq Market Quality (May 12, 1993) (``May

1993 SOES Study''). See also Securities Exchange Act Release No.

32313 (May 17, 1993), 58 FR 29647 (publication of the study for

comment).

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Therefore, in light of all the above-cited statutory findings made

by the SEC when it approved the SOES Minimum Exposure Limit rule and

the SOES Automated Quotation Update Feature, coupled with the NASD's

findings that these rules, as well as the rest of the Interim SOES

Rules, have been associated with positive market developments in terms

of lower spreads on Nasdaq and less stocks with extreme relative price

volatility, the NASD believes it would be consistent with the Act for

the Commission to extend the effectiveness of the SOES Minimum Exposure

Limit rule and the SOES Automated Quotation Update Feature for a six-

month period. In sum, the NASD believes its study and the Furbush Study

affirm the validity and correctness of the SEC's prior statutory

findings made in connection with the approval of these rules. Moreover,

even if the Commission is unwilling to find positive significance in

the NASD's statistical analyses, at the very least, these studies

indicate that the market has not been harmed by implementation of these

rules.

In addition, even if the Commission concludes that the Interim SOES

Rules have had no impact on market quality, the NASD believes the

Commission's approval of New York Stock Exchange (``NYSE'') Rule 80A on

a permanent basis illustrates that the Commission would still have a

sufficient basis to approve an extension on the SOES Minimum Exposure

Limit rule and the SOES Automated Quotation Update Feature for a six

month period.\20\ When NYSE Rule 80A was proposed, the Commission

received considerable adverse comment to the effect that there was no

causal relationship between index arbitrage and market volatility and

that activation of the rule during turbulent market conditions could

have disastrous effects on related options and futures markets and

actually exacerbate market volatility. Despite these comments, the

commission approved the proposal on a one-year pilot basis noting that

``the NYSE proposal represents a modest step, proposed on a pilot

basis, to attempt to address the issue of market volatility.''\21\

After the one year pilot, the NYSE prepared a report that, in the SEC's

words, found that the standard measures of NYSE market quality appear

largely unaffected by Rule 80A. Specifically, the NYSE Report indicated

that: (1) quotes on the NYSE did not widen after the 50 Dow Jones

Industrial Average point trigger was reached; and (2) the imposition of

Rule 80A did not have any negative effect on price continuity and depth

in the market.\22\ In addition, in approving Rule 80A on a permanent

basis, the SEC noted that the rule ``represents a modest but useful

step by the NYSE to attempt to address the issue of market

volatility.''\23\ that the rule ``has not been disruptive to the

marketplace,''\24\ and that there was a ``lack of evidence of any

harmful effects of Rule 80A.''\25\ In sum, the SEC discussion of the

statutory basis for approval of NYSE Rule 80A focused in large part on

the fact that Rule 80A did not have any adverse impacts on market

quality on the NYSE and that, as a result, the NYSE should be given the

latitude to take reasonable steps to address excessive volatility in

its marketplace. Accordingly, the NASD believes the SEC should afford

the NASD the same regulatory flexibility that it afforded the NYSE to

implement rules reasonably designed to enhance the quality of Nasdaq

and minimize the effects of potentially disruptive trading practices.

\20\Rule 80A provides that when the Dow Jones Industrial Average

declines or advances by 50 points or more, all index arbitrage

orders to sell or buy must be executed in a market stabilizing

manner.

\21\See Securities Exchange Act Release No. 28282 (July 30,

1990), 55 FR 31468, 31472 (Order approving File Nos. SR-NYSE-90-5

and 90-11).

\22\See Securities Exchange Act Release No. 29854 (Oct. 24,

1991), 56 FR 55963 (Oct. 30, 1991) (order approving file SR-NYSE-91-

21) (``Rule 80A Approval Order'').

\23\Id. 56 FR at 55967.

\24\Id.

\25\Id. 56 FR at 55967-68

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The NASD believes that the proposed rule change is consistent with

Sections 15A(b)(6), 15A(b)(9), 15A(b)(11) and 11A(a)(1)(C) of the Act.

Among other things, 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 NYSE is

proposing to extend the effectiveness of the SOES Minimum Exposure

Limit rule and the SOES Automated Quotation Update Feature for six

months because of concerns that concentrated, aggressive use of SOES by

a growing number of order entry firms has resulted in increased

volatility in quotations and transactions prices, wider spreads, and

the loss of liquidity for individual and institutional investor orders,

all to the detriment of public investors and the public interest. The

NYSE believes the SOES Minimum Exposure Limit rule and the SOES

Automated Quotation Update Feature have operated to rectify this

situation while continuing to provide an effective opportunity for the

prompt, reliable execution of small orders received from the investing

public. Accordingly, in order to protect investors and the public

interest, the NASD believes the Interim SOES Rules should be extended

through October 2, 1995, so that small investors' orders will continue

to receive the fair and efficient executions that SOES was designed to

provide.

Section 15A(b)(9) provides that the rules of the Association may

not impose any burden on competition not necessary or appropriate in

furtherance of the purposes of the Act. The SOES Minimum Exposure Limit

rule and the SOES Automated Quotation Update Feature apply across the

board and do not target any particular user or participant, as all

dealers may set their exposure limits at two times the tier size and

all dealers may elect to utilize the automated quote feature.

Accordingly, the NASD believes that these rules changes are not anti-

competitive, as they are uniform in application and they seek to

preserve the ability of SOES to provide fair and efficient automated

executions for small investor orders, while preserving market maker

participation in SOES and market liquidity.

Section 15A(b)(11) empowers the NASD to adopt rules governing the

form and content of quotations relating to securities in the Nasdaq

market. Such rules must be designed to produce fair and informative

quotations, prevent fictitious and misleading quotations, and promote

orderly procedures for collecting and distributing quotations. The NASD

is seeking to continue the effectiveness of the SOES Minimum Exposure

Limit rule and the SOES Automated Quotation Update Feature so that SOES

activity may not result in misleading quotations in the Nasdaq market.

Market makers place quotes in the Nasdaq system and these quotes

comprise the inside market and define the execution parameters of SOES.

[[Page 9708]] When volatility in the SOES environment causes market

makers to widen spreads or to change quotes in anticipation of waves of

SOES orders, quotes in the Nasdaq market become more volatile and may

be misleading to the investing public. Accordingly, absent continuation

of the SOES Minimum Exposure Limit rule and the SOES Automated

Quotation Update Feature, the quotations published by Nasdaq may not

reflect the true market in a security and, as a result, there may be

short-term volatility and loss of liquidity in Nasdaq securities, to

the detriment of the investing public. Further, the continuation of the

automated refresh feature will ensure that a market maker's quotation

is updated after an exposure limit is exhausted. Uninterrupted use of

this function will maintain continuous quotations in Nasdaq as market

makers exhausting their exposure limits in SOES will not be subject to

a `'closed quote'' condition or an unexcused withdrawal from the

market.

Finally, the NASD believes that the proposed rule change is

consistent with significant national market system objectives contained

in Section 11A(a)(1)(C) of the Act. This provision states it is in the

public interest and appropriate for the protection of investors and the

maintenance of fair and orderly markets to assure, among other things,

(i) economically efficient execution of securities transactions; (ii)

fair competition among brokers and dealers; and (iii) the practically

of brokers executing investor orders in the best market. Specifically,

the SOES Minimum Exposure Limit rule and the SOES Automated Quotation

Update Feature advance each of these objectives by preserving the

operational efficiencies of SOES for the processing of small investors'

orders, by maintaining current levels of market maker participation

through reduced financial exposure from unpreferenced orders, and by

reducing price volatility and the widening of market makers' spreads in

response to the practices of order entry firms active in SOES.

In addition, for the same reasons provided by the SEC when it

approved the Interim SOES Rules that are cited above in the text

accompanying footnotes 7 through 14, the NASD believes that the

proposed rule change is consistent with Sections 15A(b)(6), 15A(b)(9),

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

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, N.W., Washington, D.C. 20549.

Copies of the submission, all subsequent amendments, all written

statements with respect to the proposed rule change that are filed with

the Commission, and all written communications relating to the proposed

rule change between the Commission and any person, other than those

that may be withheld from the public in accordance with the provisions

of 5 U.S.C. 552, will be available for inspection for 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 File Number SR-NASD-95-8 and

should be submitted by March 14, 1995.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

\26\17 CFR 200.30-3(a)(12) (1994)

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Margaret H. MacFarland,

Deputy Secretary.

[FR Doc. 95-4085 Filed 2-17-95; 8:45 am]

BILLING CODE 8010-01-M