Notice To Members 86-49

Request for Comments on Proposed Amendment to Schedule G of the NASD By-Laws

Published Date:

TO: All NASD Members and Other Interested Persons

LAST DATE FOR COMMENTS: August 9, 1986.

The National Association of Securities Dealers, Inc. (NASD), is requesting comments on a proposed amendment to Section 2 of Schedule G of the NASD By-Laws. The proposed amendment would require NASD members to report transactions in listed securities executed between 4 p.m. and 4:30 p.m. Eastern Time to the Consolidated Tape Association (CTA) through the NASDAQ System. The text of the proposed amendment is attached.

BACKGROUND

The proposed amendment to Section 2 of Schedule G was recommended to the NASD Board of Governors by the Trading Committee as a result of concern over apparent non-uniformity of transaction reporting procedures with respect to transactions in listed securities executed between 4 p.m. and 4:30 p.m. Eastern Time. Some NASD members currently utilize NASDAQ facilities to report transactions in listed securities executed between 4 p.m. and 4:30 p.m. Eastern Time, while other NASD members report such trades via Form T. Form T is used to report trades that are executed after the close of CTA trading hours and is submitted to the NASD on a weekly basis. Information from Form T is not included in daily market activity summaries.

The proposed requirement to report transactions in listed securities executed between 4 p.m. and 4:30 p.m. Eastern Time to CTA through NASDAQ will ensure uniformity of transaction reporting procedures and will also result in the dissemination of more complete data on daily trading activity to the wire services and print media and, thus, to public investors.

It should be emphasized that transactions in listed securities executed outside exchange trading hours are considered to be over-the-counter transactions. Therefore, the proposed requirement to report to CTA through NASDAQ will be applicable to domestic transactions in listed securities executed between 4 p.m. and 4:30 p.m. by all NASD members, including those that are also members of a national securities exchange. The proposed amendment does not address the reporting of transactions in listed securities executed abroad after the close.

All members and other interested persons are invited to submit comments on the proposed amendment. Comments should be received no later than August 9, 1986, and should be directed to:

Mr. Lynn Nellius, Secretary
National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, D.C. 20006

Comments received will be considered by the Trading Committee and the NASD Board of Governors. If approved by the Board, the proposed amendment must be filed with and approved by the Securities and Exchange Commission.

Questions concerning this notice may be directed to S. William Broka, Vice President, NASDAQ Operations-Companies, at (202) 728-8050.

Sincerely,

Frank J. Wilson
Executive Vice President and General Counsel

Attachment

PROPOSED AMENDMENT TO SCHEDULE G OF THE NASD BY-LAWS*

Schedule G, Section 2 — Transaction Reporting

(a) When and How Transaction Reported
(1) Designated Reporting Members shall transmit through the NASDAQ Transaction Reporting System, within 90 seconds after execution, last sale reports of transactions in eligible securities executed in the United States between the hours of 9;30 a.m. and 4:30 p.m. Eastern Time [during the trading hours of the Consolidated Tape]. Transactions not reported within 90 seconds after execution shall be designated as late.
(2) Non-Designated Reporting Members shall transmit through the NASDAQ Transaction Reporting System or, if such System is unavailable, via Telex, TWX or telephone, to the NASDAQ Department in New York City, within 90 seconds after execution, last sale reports of transactions in eligible securities executed in the United States between the hours of 9:30 a.m. and 4:30 p.m. Eastern Time [during the trading hours of the Consolidated Tape] unless all of the following criteria are met:
(A) The aggregate number of shares of eligible securities which the member executed and is required to report does not exceed 1,000 shares in any one trading day;
(B) The total dollar amount of shares of eligible securities that the mem ber executed and is required to report does not exceed $25,000 in any one trading day; and
(C) The member's transactions in eligible securities have not exceeded the limits of (A) or (B) above on five or more of the previous ten trading days.
Transactions not reported within 90 seconds after execution shall be designated as late. If the member has reason to believe that its transactions in a given day will exceed the above limits, it shall report all transactions in eligible securities within 90 seconds after execution; in addition, if the member exceeds the above limits at any time during the trading day, it shall immediately report and designate as late any unreported transactions in eligible securities executed earlier that day.
(3) Non-Designated Reporting Members shall report weekly to the NASDAQ Department in New York City, on Form T, last sale reports of transac tions in eligible securities that are not required by paragraph (2) to be reported within 90 seconds after execution.
(4) All members shall report weekly to the NASDAQ Department in New York City, on Form T, last sale reports of transactions in eligible securities exe cuted in the United States outside the hours of 9;30 a.m. and 4;30 p.m. Eastern Time [trading hours of the Consolidated Tape].
(5) All trade tickets for transactions in eligible securities shall be time- stamped at the time of execution.

* New language is underlined; deleted language is bracketed.