Guidance Related to ADF Trading Centers Displaying Quote Condition "L"

On March 5, 2007, the Regulation NMS (Reg NMS) Trading Phase commenced. At that time, the following critical market structure changes related to the NASD's Alternative Display Facility (ADF) also took place:

  • ADF Quoting, Trade Reporting, and Comparison of Consolidated Quote System (CQS) Securities and NASDAQ Securities: All exchange-listed securities (NASDAQ-listed and CQS / Consolidated Tape System (CTS)-listed securities) became eligible for quoting, trade reporting, and comparison through the ADF.

  • Intermarket Trading System / Computer Assisted Execution System (ITS / CAES) Discontinuance: NASD discontinued all operations of ITS for CQS securities, including all ITS-related quotes, Market Maker IDs (CAES, NAQS) and associated linkages.

  • ADF Trading Center Quotations: As a result of the discontinuance of NASD participation in ITS, only ADF trading centers now display some quotations with CQS quote condition "L." The CQS Multicast Line specification describes condition "L" as follows:

    This condition is disseminated by each individual NASD Market Maker to signify either the last quote of the day or the premature close of an individual Market Maker for the day. In the latter case, the Market Maker can re-open by transmitting a quote accompanied by the Quote Condition R (Regular).

    Be advised that quote condition "L" is displayed whenever an ADF trading center is offering no quote on both sides of the market. This display by an ADF trading center is not an indication that the ADF trading center is closing for the remainder of the trading day. After a Quote Condition "L" is displayed by an ADF trading center, CQS Multicast Data Recipients should be immediately prepared for ADF trading centers to "re-open" by transmitting a quote accompanied by the quote condition "R." This "re-opening" signifies that the ADF trading center is again offering a one- or two-sided quote.

    Note that, unlike the former ITS/CAES/NAQS Market Makers that were obligated to post continuous two-sided quotations, ADF trading centers that are ECNs are not so obligated (see NASD Rule 4613A).

If you have any business questions related to the ADF, please contact Karen Sancilio, NASD, at (212) 858-5178. For any CTS/CQS technical questions, please contact Lillian Pape, SIAC, at (212) 383-4545.