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95-34 Survey Of Members That Transact Business In PORTAL Securities

SUGGESTED ROUTING

Senior Management
Legal & Compliance
Trading

Executive Summary

Members that transact business in securities designated in The PORTAL™ Market, which are not PORTAL participants, must notify the NASD of certain summary information about the volume and frequency of transactions by June 15, 1995.

Introduction

The Nasdaq Stock Market™ operates The PORTAL Market for the trading of privately placed securities that qualify under Rule 144A under the Securities Act of 1933. The PORTAL Market remains the only SEC-authorized system to provide a trading market for the resale of restricted securities. Securities that are designated PORTAL securities can receive a CUSIP number and settle through the Depository Trust Company (DTC). Participants in The PORTAL Market include PORTAL dealers, PORTAL brokers, and PORTAL qualified investors. Any NASD member that is registered as a general securities firm can become a PORTAL dealer if the member meets the $10 million investment in securities test under Rule 144A, or a PORTAL broker, if the member cannot meet the $10 million test. An investor that meets the $100 million investment in securities test under Rule 144A can be registered as a PORTAL qualified investor. There are currently 115 participants in The PORTAL Market.

The PORTAL Market accepts quotations from PORTAL dealers and PORTAL brokers that are one- or two-sided, firm or indicative. The PORTAL Market does not require firm quotations or market making. NASD members may sell PORTAL securities to any customer, regardless of whether the customer is a participant in The PORTAL Market, so long as the transaction is in compliance with Rule 144A or any other available exemption from registration.

Pilot Program

To date, because of the structure of The PORTAL Market rules in Schedule I to the NASD By-Laws, members of the NASD have not had to submit trade reports of transactions in PORTAL securities and there has been no last-sale display of transactions. Soon the NASD will submit a rule filing to the SEC to propose a pilot to report transactions in PORTAL securities to the NASD. The pilot will help the NASD develop and the SEC review revised PORTAL reporting requirements and help members and the NASD make necessary technology changes to implement such revised requirements. The NASD is currently determining an appropriate pilot start date in 1995 that will take into account the time necessary for the NASD and PORTAL participants and other members to make necessary technological changes.

The pilot will require NASD members that are not PORTAL participants to report monthly to the NASD the previous month's primary and secondary market transactions in PORTAL securities. The transaction report for each transaction requires, in addition to the standard trade-report information, that the member identify whether the contra-party is a "qualified institutional buyer" (QIB) as in SEC Rule 144A, a non-QIB institution, or an individual (the investor status information). In lieu of the foregoing investor status information, where appropriate, the member may indicate that the transaction is to an investor in an offshore market or to an investor in the U.S. public markets.

Request For Submission Of Notification

The NASD has previously communicated details of the proposed pilot directly to NASD members that are PORTAL participants. This Notice is to request NASD members that are not PORTAL participants to notify the NASD of certain summary information about the volume and frequency of transactions in PORTAL securities by June 15, 1995. The notification will help the NASD identify those members that must be contacted to establish procedures for the submission of reports to the NASD on transactions in PORTAL securities. The summary information regarding the volume and frequency of transactions will help the NASD determine the final scope of the reporting obligations to be imposed on NASD members that are not PORTAL participants. Any restricted security that has a CUSIP number and is DTC-eligible is considered a PORTAL security.

The NASD will use the information generated during the pilot to determine whether there is an identifiable group of securities that has sufficient liquidity and volume in the secondary market to permit some form of last-sale or other display of transactions to enhance price discovery. With respect to the reporting of primary transactions, the NASD will review such transaction reports to determine whether they provide sufficient support to the NASD's surveillance function to justify their continued submission.

Questions regarding this Notice should be directed to Peter T. Canada at (202) 728–8479.

FAX this form to (202) 728–8206 by June 15, 1995.

Name of member ____________________________________

Address ___________________________________________

CRD number _________ Contact person _________________

In the last six months, estimated average number of:

 

Debt

 

Equity

Primary offerings per month      
Secondary market transactions per month      
Shares traded in secondary market transactions per month      
Dollar volume of secondary market transactions per month      

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