Notice to Members 06-19

SEC Approves New Rule 3380, Order Entry and Execution Practices; Effective Date: May 25, 2006

On February 24, 2006, the Securities and Exchange Commission (SEC) approved new Rule 3380, Order Entry and Execution Practices, which prohibits conduct known as “trade shredding.”1 Specifically, under the new rule, members and associated persons are prohibited from splitting any order into multiple smaller orders for execution, or any execution into multiple smaller executions for transaction reporting for the primary purpose of maximizing a monetary or in-kind payment to the member or associated persons as a result of the execution of such orders or the transaction reporting of such executions. Rule 3380, as adopted, is set forth in Attachment A of this Notice. The rule becomes effective on May 25, 2006.

Questions regarding this Notice may be directed to the Legal Section, Market Regulation, at (240) 386-5126; or Kathryn M. Moore, Assistant General Counsel, Office of General Counsel, Regulatory Policy and Oversight, at (202) 974-2974.

1 See Securities Exchange Act Release No. 53371 (February 24, 2006), 71 FR 11008 (March 3,
2006) (File No. SR-NASD-2005-144)