Consolidated Tape Association; Notice of Filing of First Substantive Amendment to the Second Restatement of the Consolidated Tape Association Plan

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38427; File No. SR-CTA/CQ-97-1]

Consolidated Tape Association; Notice of Filing of First

Substantive Amendment to the Second Restatement of the Consolidated

Tape Association Plan

March 21, 1997.

Pursuant to Rule 11Aa3-2 of the Securities Exchange Act of 1934, as

amended (``Act''), notice is hereby given that on March 14, 1997, the

Consolidated Tape Association (``CTA'') Plan Participants filed with

the Securities and Exchange Commission (``Commission'' or ``SEC'')

amendments to the Restated CTA Plan. The Commission is publishing this

notice to solicit comments from interested persons on the amendments.

I. General Overview of the Amendment

First Substantive Amendment to the Second Restatement of the CTA Plan

The Participants to the CTA Plan propose to amend the Second

Restatement of the CTA Plan.\1\ The amendment would modify the CTA

Plan's procedures for resuming the dissemination of last sale prices

following a regulatory halt. More specifically, the amendment would

reduce from 15 minutes to ten minutes the period that must elapse

before the Processor can resume the dissemination of market data after

the primary market for the halted security notifies the Processor that

the information that triggered the halt has been adequately disclosed.

The text of the proposed amendment is available from the CTA and at the

Commission.

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\1\ The Commission approved the Second Restatement of the CTA

Plan on May 9, 1996. See Securities Exchange Act Release No. 37191,

61 FR 24842.

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II. Description and Purpose of the Amendments

A. Rule 11Aa3-2

Section XI(a) of the Second Restatement of the CTA Plan recognizes

the right of the primary market for a security to halt or suspend

trading in the security if it feels that the non-disclosure of

information relating to the security or other regulatory problems

warrants that action. After the primary market notifies the Processor

that the information that triggered the halt has been adequately

disclosed, the Processor is required to disseminate indications of

interest for the security that any Participant may provide.

If the primary market provides an indication of interest within 15

minutes of the time that it notifies the Processor about the adequate

information disclosure, the Processor may resume its dissemination of

last sale information relating to the security at the end of that 15-

minute period.

If the primary market does not provides an indication of interest

within 15 minutes of its notice to the Processor of the adequate

information disclosure, then within five minutes of the end of that

period, the primary market must cause the Processor to include on the

consolidated tape an administrative message. The message must signify

the continuation of the halt or announce the existence of a market

condition that relates to the trading of the security in the primary

market. In the latter case (i.e., the announcement), the halt

terminates five minutes after the announcement, at which time the

Processor is to resume disseminating last sale information relating to

the security.

The proposed amendment will reduce the 15-minute period to ten

minutes. This amendment will enable trading in the security to resume

ten minutes after the security's primary market notifies the Processor

that the requisite information has been adequately disclosed. In the

context of a halt that involves the announcement of an existing market

condition, the amendment will also expedite the time by which the

primary market must make the announcement, thereby expediting the

resumption of the Processor's dissemination of last sale information

relating to the security.

The post-disclosure waiting period is primarily intended to allow

an adequate opportunity for an appropriate level of dispersion of the

information that triggered the trading halt. The Participants believe

that significant increases in the speed of communications allow for

rapid dissemination of information and rapid response to that

disseminated information.

Moreover, the Participants believe the increases in the speed of

communications have shifted the balance between timeliness and the

price discovery. That is, ten minutes, rather than 15 minutes, has

become an appropriate period to arrive at a price that reflects an

appropriate equilibrium of buying and selling interest. The proposed

amendment will allow a stock to open or re-open in a more expeditious

manner, while still providing sufficient time for the appropriate

pricing of orders. As a result, the Participants believe the

[[Page 14709]]

proposed amendment strikes an appropriate balance between the

preservation of the price discovery process and the provision of timely

opportunities for investors to participate in the market.

In addition, the amendment would conform the CTA Plan to rule

changes of the New York Stock Exchange (``NYSE'') and the American

Stock Exchange (``AMEX'').\2\ In relevant part, those rule changes

reduce from 15 minutes to ten minutes the duration of the time period

that must elapse between the first publication of an indication of

interest following a trading halt and the reopening of trading in the

halted security.

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\2\ The Commission approved the NYSE rule changed on January 31,

1997. See Exchange Act Release No. 38225, 62 FR 5875 (February 7,

1997). The AMEX has filed in its version (the ``Proposed AMEX

Rule'') with the Commission and the Commission is by separate Notice

publishing the proposed rule for comment today. See Exchange Act

Released No. 38426 (March 21, 1997).

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Without the instant amendment to the CTA Plan, the NYSE and AMEX

rule changes would create the following anomaly: If an indication of

interest for a security is published less than five minutes after NYSE

or AMEX announces that the information that gave rise to a regulatory

trading halt has been adequately dispersed, NYSE and AMEX rules would

allow the specialist to reopen trading in the security before the CTA

Plan would allow the Processor to report the security's last sale price

information. This amendment would eliminate the anomaly.

Governing or Constituent Document

The proposed amendment does not change any governing or constituent

document relating to a person authorized to implement or administer the

CTA Plan on behalf of the Participants.

Implementation of Amendment

The Participants plan to implement the proposed changes upon (a)

the completion of necessary systems modification (which the Commission

is told are minor in nature) and (b) in respect of the applicability of

the proposed amendment to Network B Eligible Securities, Commission

approval of the Proposed AMEX Rule.

Development and Implementation Phases

See Item II(A)(3).

Analysis of Impact on Competition

The Participants believe the proposed amendment will impose no

burden on competition.

Written Understanding or Agreement Relating to Interpretation of, or

Participation in, Plan

The Participants have no written understandings or agreements

relating to interpretation of its CTA Plan or conditions for becoming a

CTA Plan Participant.

Approval by Sponsors in Accordance with Plan

Under Section IV(b) of the CTA Plan, each of the CTA Plan's

Participants must execute a written amendment to the CTA Plan before

the amendment can become effective. The amendment is so executed.

Description of Operation of Facility Contemplated by the Proposed

Amendment

The Participants believe the proposed amendment does not change the

manner in which the CTA Plan's facilities will be operated.

Terms and Conditions of Access

The Participants believe the amendment does not change the terms

and conditions of access.

Method of Determination and Imposition, and Amount of, Fees and Charges

The proposed amendment neither imposes any new fee or charge nor

alters any existing fee or charge.

Method and Frequency of Processor Evaluation

The proposed amendment does not change the method of frequency for

evaluating the CTA Plan Processor.

Dispute Resolution

The proposed amendment does not change the method by which disputes

may be resolved under the CTA Plan.

B. Rule 11Aa3-1

Reporting Requirements

The Participants believe the proposed amendment would not affect

the CTA Plan's reporting requirements.

Manner of Collecting, Processing, Sequencing, Making Available and

Disseminating Last Sale Information

In the context of a regulatory halt, the proposed amendment would

expedite by five minutes the time by which the Processor must make a

security's last sale prices available after the primary market for the

security notifies the processor that the information that triggered the

halt has been adequately disseminated.

Manner of Consolidation

The proposed amendment does not change the manner by which the

Participants consolidate last sale prices.

Standards and Methods Ensuring Promptness, Accuracy and Completeness of

Transaction Reports

The proposed amendment does not change the standards and methods by

which the CTA Plan ensures, promptness, accuracy and completeness.

Rules and Procedures Addressed to Fraudulent or Manipulative

Dissemination

The Participants believe the ten minute waiting period provides

adequate opportunity for the dispersion of the information that

triggered the halt.

Terms of Access to Transaction Reports

The Participants believe the proposed amendment has no effect on

the CTA Plan's specific terms of access to transaction reports made

available under the CTA Plan.

Identification of Marketplace of Execution

The proposed amendment has no effect on the provisions of the CTA

Plan that require displays to identify the marketplace where each

transaction was executed.

III. Solicitation of Comments

The CTA in its filing requested immediate effectiveness (subject to

the implementation period described above) of this amendment pursuant

to Rule 11Aa3-2(c)(3)(ii) under the Act. That rule provides that

amendments concerned solely with the administration of the plan may be

put into effect upon filing if so designated by the Participants. The

Commission does not believe that this filing is concerned solely with

the administration of the Plan. Rather the proposed amendment would

have an effect upon trading practices within the National Market

System. Moreover, the Commission today has also published for comment a

rule proposal by the AMEX that relates to the applicability of the

proposed CTA amendment to Network B eligible securities.\3\

Consequently, the Commission has decided to publish this proposed

amendment in accordance with Rule 11Aa3-2(c)(1).

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\3\ Id.

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

arguments concerning the foregoing.

[[Page 14710]]

Persons making written submissions should file six copies thereof with

the Secretary, Securities and Exchange Commission, 450 Fifth Street,

NW., Washington, DC 20549. Copies of the submission, all subsequent

amendments, all written statements with respect to the proposed rule

change that are filed with the Commission, and all written

communications relating to the proposed rule change between the

Commission and any person, other than those that may be withheld from

the public in accordance with the provisions of 5 U.S.C. 552, will be

available for inspection and copying in the Commission's Public

Reference Room. Copies of such filing will also be available for

inspection and copying at the principal office of the CTA. All

submissions should refer to the file number in the caption above and

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should be submitted by April 17, 1997.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\4\

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\4\ 17 CFR 200.30-3(a)(27) (1989).

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Jonathan G. Katz,

Secretary.

[FR Doc. 97-7784 Filed 3-26-97; 8:45 am]

BILLING CODE 8010-01-M