1 Securities Exchange Act Release No. 42400 (February 7, 2000), 65 FR 7407 (February 14, 2000).
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February 28, 2000
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 10-00
RE: SEC APPROVES NASD PROPOSED RULE CHANGE RELATING TO LOCKED
AND CROSSED MARKETS
______________________________________________________________________________
The SEC has approved a proposed rule change filed by the National Association of Securities
Dealers, Inc. ("NASD"), through its wholly-owned subsidiary, The Nasdaq Stock Market, Inc.
("Nasdaq"), altering the obligations of market participants regarding locked and crossed markets that
occur prior to the market's open.1
Locks or Crosses Occurring At or After 9:20 a.m. and Before 9:30 a.m.
A market participant that enters a quotation that locks or crosses the market between 9:20 a.m.
and 9:29:59 a.m. will be required to send, prior to or immediately after entering a locking or crossing
quotation, a SelectNet message (“Trade-or-Move Message”) in an aggregate amount of at least 5,000
shares to each market participant that he locks or crosses. Within 30 second of receiving a Trade-or-
Move Message, the recipient must either: (1) trade in full with the incoming Trade-or-Move Message; (2)
decline to trade with the incoming Trade-or-Move Message and move its quotation to a price level that
unlocks or uncrosses the market; or (3) trade with a portion of the incoming Trade-or-Move Message
and move its quotation to a level that unlocks or uncrosses the market.
Locks or Crosses Prior to 9:20 a.m.
Beginning at 9:20 a.m., any market participant that is a party to a lock or cross that occurred
prior to 9:20 a.m. will have the right, but not an obligation, to send a Trade-or-Move Message to any
party to the lock or cross. A market participant that receives a Trade-or-Move Message must respond
within 30 seconds by choosing one of the three options discussed above for a lock or cross occurring at
or after 9:20 a.m. Unlike a market participant that actively locks or crosses the market after 9:20 a.m.,
however, a market participant that locks or crosses the market prior to 9:20 a.m. is not obligated to send
a specific number of shares to all parties to the lock or cross.
Ari Burstein
Assistant Counsel
Attachment