NASD Notice to Members 03-11 - February 2003

SEC Approves Changes to Rule on Clearly Erroneous Transactions; Changes Effective Immediately

Executive Summary

On January 22, 2003, the Securities and Exchange Commission (SEC) approved changes to NASD Rule 11890 regarding the handling of clearly erroneous transactions. The changes, which take effect immediately, are intended primarily to clarify the rule's scope and language rather than to modify the application of the rule to particular transactions. Important clarifications made by the rule change include the following:

  • NASDAQ will adjudicate erroneous transaction complaints only if they concern transactions executed through NASDAQ systems and only if the parties to the transactions are readily identifiable.
  • On its own motion, NASDAQ may nullify or modify any transaction that is executed or reported through a NASDAQ system, if NASDAQ determines that action is necessary for the maintenance of a fair and orderly market or the protection of investors and the public interest.

Questions regarding this Notice may be directed to Richard Bush, Director, NASDAQ Market Operations, at (203) 385-6242; or John Yetter, Assistant General Counsel, Office of General Counsel, The NASDAQ Stock Market, Inc., at (202) 912-3039.