NASD Notice to Members 98-085 - October 1998

SEC Approves Rule Changes Regarding Electronic Communication Networks, Locked and Crossed Markets, and Members’ Obligation to Provide Nasdaq with Certain Information

Executive Summary

On September 22, 1998, the Securities and Exchange Commission (SEC) approved amendments to the National Association of Securities Dealers, Inc. (NASD® or Association) rules regarding Electronic Communications Networks (ECNs) and locked and crossed markets. The SEC also approved a new rule regarding information requests made by Nasdaq® to NASD members.

Specifically, the rule changes: (1) amend NASD Rule 4623 to specify the manner in which ECN orders that have a reserved size must interact with incoming SelectNetSM messages; (2) amend Rule 4613(e) to specify the manner in which quotations that are entered into Nasdaq at or after 9:25 a.m. and that lock or cross the market on the opening, must be resolved at the market’s opening; and (3) add Rule 4625, which will require members that participate in The Nasdaq Stock Market® to provide information to Nasdaq departments and staff when information is so requested. The rule changes are effective November 1, 1998.