11890. Clearly Erroneous Transactions
(a) Procedures for Reviewing Transactions on NASD's Own Motion
In the event of (1) a disruption or malfunction related to the use or operation of any quotation, communication, or trade reporting system owned or operated by NASD or its subsidiaries and authorized by the Commission, or (2) extraordinary market conditions in which the nullification or modification of transactions may be necessary for the maintenance of a fair and orderly market or the protection of investors and the public interest, an Executive Vice President of NASD's Market Regulation Department or an Executive Vice President of NASD's Transparency Services Department, or any officer designated by such Executive Vice President, may, on his or her own motion, review any transaction arising out of or reported through any such quotation, communication, or trade reporting system. An NASD officer acting pursuant to this paragraph may declare any such transaction null and void or modify the terms of any such transaction if the officer determines that (i) the transaction is clearly erroneous, or (ii) such actions are necessary for the maintenance of a fair and orderly market or the protection of investors and the public interest; provided, however, that the officer shall take action pursuant to this paragraph as soon as possible after becoming aware of the transaction, but in all cases by 3:00 p.m., Eastern Time, on the next trading day following the date of the transaction at issue.
(b) Review by the Uniform Practice Code ("UPC") Committee
(1) A member or person associated with a member may appeal a determination made under paragraph (a) to the UPC Committee, unless the officer making the determination also determines that the number of the affected transactions is such that immediate finality is necessary to maintain a fair and orderly market and to protect investors and the public interest. An appeal must be made in writing, and must be received by NASD within thirty (30) minutes after the person making the appeal is given the notification of the determination being appealed, except that if NASD notifies the parties of action taken pursuant to paragraph (a) after 4:00 p.m., the appeal must be received by 9:30 a.m. the next trading day. Once a written appeal has been received, the counterparty to the trade that is the subject of the appeal will be notified of the appeal and both parties shall be able to submit any additional supporting written information up until the time the appeal is considered by the UPC Committee. Either party to a disputed trade may request the written information provided by the other party during the appeal process. An appeal shall not operate as a stay of the determination being appealed, and the scope of the appeal shall be limited to trades which the person making the appeal is a party. Once a party has appealed a determination to the UPC Committee, the determination shall be reviewed and a decision rendered, unless (i) both parties to the transaction agree to withdraw the appeal prior to the time a decision is rendered, or (ii) the party filing the appeal withdraws its appeal prior to the notification of counterparties under this paragraph (b)(1). Upon consideration of the record, and after such hearings as it may in its discretion order, the UPC Committee, pursuant to the standards set forth in this rule, shall affirm, modify, reverse, or remand the determination.
(2) The decision of the UPC Committee pursuant to an appeal, or a determination by an NASD officer that is not appealed, shall be final and binding upon all parties and shall constitute final action on the matter in issue. Any determination by an NASD officer pursuant to paragraph (a) or any decision by the UPC Committee pursuant to paragraph (b) shall be rendered without prejudice as to the rights of the parties to the transaction to submit their dispute to arbitration.
(1) All materials submitted pursuant to this Rule shall be submitted within the time parameters specified herein via such telecommunications procedures as NASD may announce from time to time in an NASD Notice to Members . Materials shall be deemed received at the time indicated by the equipment (i.e., facsimile machine or computer) receiving the materials. NASD, in its sole and absolute discretion, reserves the right to reject or accept any material that is not received within the time parameters specified herein.
(2) NASD shall provide affected parties with prompt notice of determinations under this Rule via facsimile machine, electronic mail, or telephone (including voicemail); provided, however, that if an officer nullifies or modifies a large number of transactions pursuant to paragraph (a), NASD may instead provide notice to parties via a press release or any other method reasonably expected to provide rapid notice to many market participants.
Amended by SR-FINRA-2008-037 eff. July 8, 2008.
Amended by SR-NASD-2006-104 eff. March 5, 2007.
Amended by SR-NASD-2006-121 eff. Oct. 30, 2006.
Amended by SR-NASD-2005-087 eff. Aug. 1, 2006
Amended by SR-NASD-2006-033 eff. Mar. 1, 2006.
Amended by SR-NASD-2005-089 eff. Oct. 1, 2005.
Amended by SR-NASD-2005-115 eff. Sep. 22, 2005.
Amended by SR-NASD-2004-009 eff. July 27, 2005.
Amended by SR-NASD-2003-125 eff. Aug. 8, 2003.
Amended by SR-NASD-2002-127 eff. Jan. 22, 2003.
Amended by SR-NASD-98-85 eff. October 11, 1999.
Amended by SR-NASD-98-94 eff. April 26, 1999.
Amended by SR-NASD-96-51 eff. Feb. 23, 1998.
Amended June 21, 1991; May 21, 1993.
Adopted eff. Apr. 2, 1990.
Selected Notices: 98-21, 99-29, 00-10, 03-11.