TO: All NASD Members and Other Interested Persons
On January 20, 1986, the NASD issued Notice to Members 86-4, announcing the Securities and Exchange Commission's approval of new Article III, Section 41 of the NASD Rules of Fair Practice. The new rule requires all NASD members to maintain a record of their total "short" positions in NASDAQ securities in all customer and proprietary firm accounts and to report aggregate "short" positions to the NASD on a monthly basis beginning in February 1986. The Notice to Members also included a copy of Form NS-1, the reporting form that members should utilize in making monthly reports of aggregate "short" positions.
Since the issuance of the notice, certain questions have arisen regarding the use of the form. To clarify:
1. Form NS-1 should be mailed monthly to:
National Association of Securities Dealers, Inc.
P. O. Box 37272
Washington, DC 20013
2. In lieu of completing and returning Form NS-1 to the address specified above, members may submit data on aggregate "short" positions via computer tape. For information on tape format, contact Phil Coma, NASD Information Systems Department, at (202) 728-8887.
3. The requirement under Article III, Section 41 to report monthly aggregate "short" positions in NASDAQ securities applies to all NASD members that maintain proprietary or customer "short" positions on the settlement date falling on the 15th of each month or, when the 15th is a non-settlement date, on the preceding settlement date. The reporting requirement applies to all NASD members, not only registered NASDAQ market makers.
4. Members that do not carry any customer or proprietary "short" positions in NASDAQ securities on a reporting settlement date are not required to complete Form NS-1 that month.
5. "Short" positions created as a result of arbitraged transactions are required to be included in the reported aggregate "short" positions. A member that does not believe that the resulting positions are truly "short" positions must report them on Form NS-1, but may attach an explanation.
6. Long sales by customers who have not yet delivered the securities at the time of reporting should not be included in aggregate "short" positions.
Questions regarding Form NS-1 may be directed to Leon Bastien, NASD Market Surveillance Section, at (202) 728-8192. If you need information concerning the filing of Form NS-1, call Elizabeth A. Wollin, NASD Automated Reports Section, at (202) 728-3111.
Frank J. Wilson
Executive Vice President and General Counsel