Notice to Members 00-78
SEC Approves Proposed Changes to the NASD Three Quote Rule and Related Recordkeeping Requirements
On September 21, 2000, the Securities and Exchange Commission (SEC) approved amendments to National Association of Securities Dealers, Inc. (NASD®) Rules 2320(g) and 3110(b), which:
- require that members executing a customer order in a non- Nasdaq® security contact and obtain quotations from three dealers (or all dealers if three or fewer) to determine the best inter-dealer market for the security, unless two or more priced quotations are displayed in an inter-dealer quotation system that permits quotation updates on a real-time basis (such as the OTC Bulletin Board® (OTCBB) or the electronic pink sheets);
- require that members displaying priced quotations for the same non-Nasdaq security in two or more quotation mediums that permit quotation updates on a real-time basis display the same priced quotations for the security in each quotation medium;
- no longer require that a member indicate on the order ticket for each transaction in a non-Nasdaq security the name of each broker/dealer contacted and the quotations received if two or more priced quotations are displayed and NASD Regulation has access, on a historical basis, to the quotation data; and
- define the terms “inter-dealer quotation system” and “quotation medium” for the purposes of the proposed rule change.
The amendments become effective on November 24, 2000. The amendments to Rules 2320 and 3110 are provided in Attachment A.