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November 3, 1999 Wayne Lee (202) 728-8067

NASD Proposes Launch of a New Bond Trade Reporting and Transaction Dissemination Facility

Washington, D.C.—The National Association of Securities Dealers, Inc. (NASD®), today announced that it has submitted a proposal to the Securities and Exchange Commission (SEC) seeking permission to implement a newly-developed trade reporting and transaction dissemination facility for corporate bonds. The system was created in response to SEC Chairman Arthur Levitt’s call for increased bond market transparency. It was designed to enhance the price transparency and surveillance of the U.S. corporate debt market, and requires final approval from the SEC.

The proposal to increase bond market transparency is the result of a collaborative effort by the NASD and the Bond Market Transparency Committee, a blue ribbon panel of bond- industry experts that included institutional investors, retail and institutional broker/dealers, inter-dealer brokers, an academic and industry representatives from the Bond Market Association, the American Association of Individual Investors and the Securities Industry Association.

If implemented, NASD members will begin reporting in spring of 2000 all over-the-counter transactions involving eligible corporate bonds. Initially, transactions will be sent to a reporting system within one hour of execution. Six months after the facility is introduced, the time frame will be compressed and the NASD will commence dissemination of the transactions to the public.

Trades will be entered into the Trade Reporting and Comparison Entry Service (TRACESM), a multi-functional service designed to facilitate the reporting and comparison of fixed-income trades. TRACE is a facility of the The Nasdaq Stock Market®, a subsidiary of the NASD. Its technology was derived in part from Nasdaq’s Automated Confirmation Transaction Service (ACTSM). TRACE will operate from 8 a.m to 6:30 p.m., Eastern Time and replace the existing Fixed Income Pricing System (FIPSSM), which collects trade reports on eligible high-yield securities.

"TRACE will help greatly improve transparency in the corporate bond market," said J. Patrick Campbell, Chief Operating Officer and Executive Vice President of The Nasdaq-Amex Market Group, Inc., a subsidiary of the NASD. "Investors will be armed with much more information—fostering new confidence in the corporate debt market."

The plan will be implemented in two phases. The following are highlights of Phase I, which address regulatory reporting and surveillance requirements for debt securities:

• Implementation date: Spring of the year 2000 (after completion of the Y2K initiative).
• Securities subject to reporting: U.S. dollar denominated debt securities issued by U.S. and private foreign corporations that are registered with the SEC and eligible for book-entry services at the Depository Trust Company (DTC), and Rule 144A debt securities (which will not be disseminated). This includes both high-yield and convertible debt securities. (Securities not subject to reporting include sovereign and development bank debt, mortgage-backed or asset-backed securities, Collaterized Mortgage Obligations (CMOs), or money market instruments. Also not subject to reporting are trades in listed bonds executed on and reported to an exchange).
• Who must report: The NASD member on the sell side and the NASD member on the buy or sell side (in a trade with a customer or a non-member broker/dealer).
• Elements of the trade report: Buy/sell, CUSIP or NASD symbol, quantity, price, contra-party’s NASD symbol, and the date and time of trade execution and trade capacity.
• Phase-in plan for securities and timing of reporting:
  First month: High-yield and convertible debt securities, with one-hour reporting and no dissemination, with the exception of trade data on 50 liquid high-yield bonds (current FIPS 50 bonds);
  Second and third months: Alphabetical phase-in of reporting for remaining securities, with one-hour reporting and no dissemination; and
  Fourth, fifth, and sixth months: One-hour reporting and no dissemination. Ensure data integrity and assess the ability of member firms to report.
• Methods of trade reporting: Utilization of TRACE, which will allow vendors and service bureaus to provide data on behalf of their clients via a Nasdaq® computer-to-computer-interface. Additionally, a browser-based workstation will allow members to enter information manually via the Internet or other private network.

The following are elements of Phase II, which address the dissemination of trade information:

• Elements of information to be disseminated: Bond description, quantity (limited by a cap), price, date and time of execution.
• Method of dissemination: Web site query capability and dissemination to vendors.
• Plan for initiation of dissemination:
  Seventh, eighth, and ninth months: 15-minute reporting of all reportable debt securities, with dissemination of trade report data and assessment of impact on market liquidity.

The National Association of Securities Dealers, Inc. (NASD), is the largest securities-industry, self-regulatory organization in the United States. It is the parent organization of The Nasdaq-Amex Market Group, Inc., and NASD Regulation, Inc. Through The Nasdaq-Amex Market Group^SM, the NASD operates The Nasdaq Stock Market® and the American Stock Exchange®. Through its regulatory subsidiary, the NASD develops rules and regulations, provides a dispute resolution forum, and conducts regulatory reviews of member activities for the protection and benefit of investors. The NASD oversees the nation’s 5,600 brokerage firms and more than 600,000 registered brokers. For more information about the NASD and its subsidiaries, please visit the following Web sites: www.nasd.com; www.nasdaq-amex.com; or the Nasdaq-Amex Newsroom^SM at www.nasdaq-amexnews.com.