News Release

NASD Board Approves New Integrated Order-Delivery and Execution System

Washington, DC—The National Association of Securities Dealers, Inc. (NASDâ), today announced that its Board has approved a new system and rules that will replace The Nasdaq Stock Market’sSM Small Order Execution SystemSM (SOESSM) and SelectNetSM service. The new order-delivery and execution system will include a voluntary limit order file and will improve upon and integrate into a single system the functionality currently separated between SOES and SelectNet. In addition, the system will permit institutional investors, through broker-sponsored accounts, to directly access orders and quotations in The Nasdaq Stock Market.

This new system will provide investors greater access to the market and a more efficient way of displaying their trading interest. It will permit all registered participants to send orders to access either the best Market Maker quote or electronic communications network (ECN) order, or orders visible in the Nasdaq limit-order file, and to obtain immediate or rapid execution of such orders. The measure is now subject to approval by the Securities and Exchange Commission.

"We believe this proposal provides an efficient integration of price discovery, order execution, and trade reporting as well as the opportunity to provide greater transparency of investor orders," said Frank G. Zarb, Chairman, CEO and President of the NASD. "While this proposal is not without controversy, we believe that on balance it is in the best interest of investors, our market makers and our issuers. We look forward to hearing from all market participants and are open to any refinements that will improve the proposal."

"This system will provide significant improvements to Nasdaq’s market structure. The limit-order book and integrated-order execution system represents major strides toward providing an improved market structure for investors and Market Makers," said James Dimon, Chairman and CEO of Smith Barney, Inc., and an NASD Board member.

"Investors are demanding a market structure that provides full display of limit order interest, fast and efficient access to the best prices, and efficient integration of price discovery, execution and trade reporting," said John Markese, President of the American Association of Individual Investors and a Nasdaq Board member. "This proposal accomplishes all that and provides for order anonymity, that will increase integration of best prices that began under the Order Handling Rules."

"In this era of increasing efficiencies through greater and more effective use of technology, it is critical for our market to make the changes necessary to remain competitive," said Michael Brown, retiring Chief Financial Officer at Microsoft and current Chairman of the Nasdaq Board of Directors. "The proposal adopted by the NASD Board today is a critical step in this process and will go a long way to improve investor access to our market and reduce market maker costs—bottom line, this is a win-win proposal for our market and all its participants."

The NASD is the largest securities-industry self-regulatory organization in the United States. Through its subsidiaries, NASD Regulation, Inc., and The Nasdaq Stock Market, Inc., the NASD develops rules and regulations, provides a dispute resolution forum, conducts regulatory reviews of members activities and designs, operates and regulates securities markets all for the benefit and protection of the investor.