NASD Notice to Members 99-65 - August 1999

SEC Approves Rule Changes to NASD Trade-Reporting Rules for Riskless Principal Transaction in Nasdaq and OTC Securities

Executive Summary

On March 24, 1999, the Securities and Exchange Commission (SEC) approved amendments to National Association of Securities Dealers, Inc. (NASD® or Association) rules regarding trade reporting of riskless principal transactions by Market Makers. The rule change will permit Market Makers in Nasdaq® and other over-the-counter securities to report trades under the current riskless principal rules that exist for non-Market Makers. The effect of the change is that instead of reporting both "legs" of a riskless principal transaction, Market Makers (like non-Market Makers currently) now will only report one portion of the transaction if it meets the definition of riskless principal. The rule defines riskless principal as a trade in which a member, after having received an order to buy (sell) a security, buys (sells) the security at the same price, as principal, in order to satisfy the order to buy (sell).

 

Questions concerning this Notice may be directed to the Office of General Counsel, The Nasdaq Stock Market, Inc., at (202) 728-8294; or Market Regulation Legal Section, NASD Regulation, Inc. (NASD Regulation®), at (301) 590-6410.