|Wednesday, June 26, 2002
Nancy A. Condon 202-728-8379
Michael Shokouhi 202-728-8304
NASD Suspends and Sanctions Trader for Marking the Close; Issues Cautionary Note Prior to Russell 2000 Rebalance
Washington, D.C. — NASD today announced that it suspended Alan M. Remer for four months for market manipulation by "marking the close" on three separate occasions. Remer was also fined $7,500.
"Marking the close" is a form of market manipulation. The practice involves attempting to influence the closing price of a security by executing purchase or sale orders at or near the close of normal trading hours. Such activity can artificially inflate or depress the closing price for the security and can affect price of "market-on-close" orders. On three occasions, Remer received a market-on-close sell order that required him to purchase a block-sized order of a security at the price of the last trade executed during normal business hours. In each instance, Remer executed the last trade himself and did so at an artificially low price. As a result, Remer was able to purchase the market-on-close block from his customer at the artificially low price established by his last trade.
Effects on Index Rebalancing
The practice of "marking the close" will have a disproportionately adverse impact when it occurs on an expiration Friday or on an index rebalancing day, such as the Russell 2000 Index rebalancing, which takes place on June 28, 2002. On rebalancing days, securities are added to and deleted from an index. Market makers often receive large market-on-close orders on expiration Fridays and rebalancing days as customers adjust their portfolios to reflect the expiration of options, index options, futures and the rebalanced index. Accurate pricing at and around the market's close on index rebalancing days is critically important to a fair and orderly rebalancing process.
NASD always monitors for manipulative activity and will be scrutinizing market activity on June 28, 2002 for improper attempts to influence closing prices.
Investors can obtain more information about NASD as well as the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999, or by sending an e-mail through one of NASD's Web sites, www.nasdr.com.
NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business -- from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web site at www.nasd.com.