1 See Memorandum to Equity Markets Advisory Committee No. 35-99 and SEC Rules Committee No. 84-99, dated October
21, 1999.
2 Securities Exchange Act Release No 42004 (October 13, 1999).
3 In conjunction with the calculation and distribution of the inside quote starting on February 7, 2000, NASD members will
be required to comply with all applicable limit order protection and display rules. Until then, the SEC has indicated that it will
provide temporary relief from those rules due to the lack of an inside quote calculation.
[11446]
December 3, 1999
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 37-99
SEC RULES COMMITTEE No. 102-99
RE: NASD DELAYS IMPLEMENTATION OF AFTER-HOURS INSIDE QUOTE
CALCULATION
______________________________________________________________________________
As we previously informed you,1 the Securities and Exchange Commission (“SEC”) granted
accelerated approval to a pilot program that extends the availability of some of the Nasdaq Stock
Market's ("Nasdaq") trade reporting and quote dissemination systems until 6:30 p.m. Eastern Standard
Time (“EST”) to accommodate after-hours trading.2 As part of the pilot program, Nasdaq will begin to
calculate a post 4:00 p.m. EST inside quote (i.e., the best bid and ask) for those Nasdaq securities that
exhibit after-hours quotation activity.
In a comment letter on the Nasdaq proposal (a copy of which is attached), the Institute
emphasized that the changes would have an adverse impact on the ability of many funds to value certain
securities and calculate NAVs in a timely manner and, because Y2K system lock-downs are in place
throughout the fund industry, any such changes would require subsequent re-testing and re-certification
of all affected systems for Y2K compliance. In response, on December 1, Nasdaq announced in the
attached press release that it will delay the implementation of inside quotation calculations in the after-
hours trading market until February 7, 2000. At that time, Nasdaq will calculate a continuous inside
quote throughout the after-hours session in those securities in which market participants have entered
quotations. Nasdaq stated that the delay in implementation resulted from the fund industry’s concern
regarding its ability to provide accurate NAVs based on the official 4:00 p.m. EST closing inside quote.3
Ari Burstein
Assistant Counsel
Attachments