Notice to Members 02-45

Alternative Display Facility (ADF) Nine-Month Pilot Approved for Trading in Nasdaq Securities

On July 24, 2002, the Securities and Exchange Commission (SEC) approved amendments to NASD rules that establish, implement, and operate NASD's Alternative Display Facility (ADF) on a pilot basis for nine months. As described in more detail herein, members that choose to participate in the ADF during the pilot may quote and trade Nasdaq-listed securities on or through the ADF, commencing on July 29, 2002. NASD has proposed the permanent establishment and operation of the ADF in a separate rule filing, which would provide market participants the ability to quote and trade Nasdaq and exchange- listed securities. However, several regulatory issues relating to the trading of exchange-listed securities on the ADF have not been resolved. Because these open issues do not relate to trading Nasdaq securities, NASD has received approval to operate the ADF on a pilot basis with respect to Nasdaq securities only.

The SEC Approval Order, which includes the text of the amendments, is available at This Notice is intended to provide an overview of how the ADF will operate and member requirements in this regard. For additional information regarding ADF, members should review the SEC Approval Order and other ADF documentation available at ‌‌http://‌‌www‌.nasd.‌‌com‌/mkt_sys/adf_info.asp.

Questions concerning this Notice related to the rules should be directed to either the Division of Regulatory Policy and Oversight, Office of General Counsel, at (202) 728-8071, or Market Regulation Department, at (240) 386-5126. Questions related to the operation of the ADF or becoming an ADF participant should be directed to the Division of Regulatory Services and Operations, Market Operations and Information Services, at (866) 776-0800 or (212) 858-5178.