Interpretive Letter to Kenneth E. Leopold, Neuberger & Berman, LLC
Mr. Kenneth E. Leopold
Neuberger & Berman, LLC
605 Third Avenue
New York, N. Y. 10158-3698
Dear Mr. Leopold:
Your letter to Mr. Paul McKenney, dated May 27,1998, has been given to me for reply. In your letter, you stated that Neuberger & Berman, LLC ("Neuberger") uses Brass as a service provider in conducting its business as a market maker in Nasdaq equity securities. You noted that the Brass clock is the only computer system clock Neuberger uses to time stamp orders in Nasdaq securities. You also added that Brass has provided Neuberger a document, a copy of which you provided us, detailing Brass’ computer system clock synchronization procedures. You asked us to review this document and determine whether it is "…sufficient in terms of the requirement for August 7, 1998 deadline for the computer system clock synchronization; and proper evidence of compliance therewith."
With respect to the clock synchronization requirements, please be advised that the requirements of Rule 6953 apply to each member’s "… business clocks that are used for purposes of recording the date and time of any event that must be recorded pursuant to the By-Laws or other rules of the Association…" This means that the computer clock synchronization requirements are intended to cover, for example, order events in Nasdaq equity securities as well as in securities other than Nasdaq equities, such as Listed securities, OTCBB and Pink Sheet securities, etc. where the NASD imposes a requirement to record particular events. As such, if Brass is your only computer system used to record the date and time of an event that must be recorded pursuant to the Association’s By-Laws or rules, then it will be the only computer clock that will need to be synchronized effective August 7, 1998.
Compliance with the requirement that clocks be synchronized to a source that is accurate to within 3 seconds of NIST is a question of fact. Whether a clock meets that requirement as to any particular day can only be determined only by testing. The compliance responsibility for the accuracy of the business clocks resides with the member firm. However, the document detailing Brass’ procedures for synchronizing its computer clocks may be used by Neuberger as evidence that the firm has adopted procedures designed to assure compliance with Rule 6953.
I hope this letter is responsive to your inquiry. Please note that the opinions expressed in this letter are staff opinions only and have not been reviewed or endorsed by the Board of Directors of NASDR. The letter responds only to the issues you have raised based on the facts as you have described them in your letter, and does not necessarily address any other rule or interpretation of the NASD or all the possible regulatory and legal issues involved.
Should you have any questions regarding this interpretation, please contact me directly at (301)208-2865.
Kevin P. McEvoy
Member Firm Compliance Section
Market Regulation Department