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FINRA

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Thursday, November 15, 2001
Michael Shokouhi
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NASD Regulation Sanctions Seven for Trade or Move Violations

Washington D.C. — NASD Regulation, Inc. today announced that it has settled seven separate disciplinary actions against firms for violations of the NASD's Trade or Move Rule. The seven firms involved in today's actions were censured and fined a total of $120,000.

 

The Trade or Move Rule applies to all securities listed on The Nasdaq Stock Market, and is designed to ensure that the markets for Nasdaq stocks open in a fair and orderly manner. Markets become locked and crossed when a market maker enters or maintains an 'ask' price for a security that is the same or lower than the 'bid' price of another market maker. Locked or crossed quotations may occur in fast-moving markets and can have significant impact on the opening of trading in newly offered securities. The rule requires firms that lock or cross the market during the time period between 9:20 a.m. to 9:30 a.m., EST, immediately send Trade or Move messages to the parties with whom it has locked or crossed. Firms receiving Trade or Move messages during this time period must, within 30 seconds of receipt, either execute the trade in full or move their quote to an unlocking price.

 

Compliance with the Trade or Move Rule is critically important to ensuring accurate pricing at the open of The Nasdaq Stock Market. The rule generally has been viewed, since its adoption in 2000, as having increased the ability of investors to get fair prices, increased market transparency and improved price discovery in The Nasdaq Stock Market at the open.

 

The following firms were censured and fined a total of $120,000 by NASD Regulation for violations of the Trade or Move Rule:

National Financial Services, L.L.C., $30,000 (includes a fine for locked and crossed violation during normal business hours);

  • Windsor Capital Advisors, Inc., $20,000;
  • Prudential Securities Incorporated, $20,000 (includes a fine for locked and crossed violation during normal business hours);
  • Pershing Trading Company, L.P., $20,000;
  • Gerard Klauer Mattison & Co., Inc., $10,000;
  • BancBoston Robertson Stephens, $10,000; and
  • J.P. Morgan Securities, Inc., $10,000.

These actions are the result of reviews conducted by the Trading Practices Section within NASD Regulation's Market Regulation Department. These firms have neither admitted nor denied the allegations, but have consented to the entry of findings pursuant to the settlements.

 

These disciplinary actions highlight NASD Regulation's commitment to enforce member compliance with trading rules essential to market quality and customer protection. NASD Regulation notes that industry-wide compliance with the Trade or Move Rule has improved considerably in recent periods of potential volatility, such as the September 2001 Expiration when equity, futures and index options expired on the same date.

 

Investors can obtain the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999, or by sending an e-mail through NASD's Web site.

 

The National Association of Securities Dealers, Inc., is the largest securities-industry, self-regulatory organization in the United States. It is the parent organization of NASD Regulation, Inc.; the American Stock Exchange, LLC; and NASD Dispute Resolution, Inc. For more information about the NASD and its subsidiaries, please visit the following Web sites: www.nasd.comwww.amex.com.