[11832]
April 24, 2000
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 28-00
SEC RULES COMMITTEE No. 63-00
RE: INSTITUTE COMMENT LETTER ON AMENDED NASDAQ ORDER DISPLAY
FACILITY PROPOSAL
______________________________________________________________________________
The Institute has filed a comment letter (a copy of which is attached) with the Securities and
Exchange Commission in connection with a proposed rule change filed by the NASD to amend certain
aspects of its previous proposal to establish the Nasdaq Order Display Facility and to modify the
Nasdaq trading platform. In particular, in response to comments on the original proposal, Nasdaq is
proposing to amend, among other things, (1) the five-second interval delay between price levels and (2)
the order execution algorithm as it relates to ECNs, UTP Exchanges, and displayed size refreshed from
reserve.
The comment letter states that the Institute strongly supports modifications to Nasdaq’s
quotation montage and trading platform. The letter, however, reiterates our concerns regarding the level
of transparency in the proposed Order Display Facility as well as the internalization feature of the
proposed system. The letter states that the Institute believes these aspects of the proposal require
further examination before the SEC approves the proposed rule change.
In addition, the letter states that the Institute is pleased that Nasdaq has amended its proposal to
provide for a more limited interval delay between price levels to address concerns raised by the Institute
and other commenters regarding the proposed five-second interval delay. The letter also states,
however, that because of the brevity of the proposal’s comment period, we are not able, at this point, to
comment definitively on whether this change sufficiently addresses our concerns. Finally, the letter
states that we question the change to size priority from time priority to determine the order in which
“reserve” orders are filled as this could discourage market participants from displaying orders greater
than 1,000 shares.
Ari Burstein
Assistant Counsel
Attachment