Memo #
11881
NASD PROPOSED RULE CHANGE RELATING TO THE ENTRY OF LOCKING/CROSSING QUOTATIONS PRIOR TO THE MARKET OPENING
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* Securities Exchange Act Release No. 42754 (May 3, 2000), 65 FR 30167 (May 10, 2000) (“Release”).
Comments on the proposed rule change are due to the SEC no later than May 31, 2000.
[11881]
May 12, 2000
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 31-00
SEC RULES COMMITTEE No. 74-00
RE: NASD PROPOSED RULE CHANGE RELATING TO THE ENTRY OF
LOCKING/CROSSING QUOTATIONS PRIOR TO THE MARKET OPENING
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The Securities and Exchange Commission has published for comment a proposed rule change
filed by the NASD, through its wholly-owned subsidiary, the Nasdaq Stock Market, relating to the entry
of locking/crossing quotations prior to the market's open.* Currently, if a market participant
locks/crosses the market between 9:20 a.m. and 9:29:59 a.m. Eastern Time, the market participant must
send the market maker(s) or ECN(s) being locked/crossed a SelectNet message that has appended to it a
“Trade-or-Move Message.” The aggregate size of this Trade-or-Move Message must be at least 5,000
shares, even if the market maker or ECN is representing an agency order for less than 5,000 shares.
The proposal states that some market participants have raised concerns that this rule may
exclude certain agency interests from being reflected in the pre-opening market if those interests are less
than 5,000 shares. In light of these concerns, Nasdaq is proposing to amend its rules to state that if,
between 9:20 a.m. and 9:29:59 a.m., a market participant receives an agency order that would lock/cross
the market, the market participant may lock/cross the market and send a Trade-or Move Message for
the “actual size” of the agency order, instead of 5,000 shares. Nasdaq states that it believes that allowing
agency orders to be displayed in the market at their actual share sizes for purposes of resolving
locked/crossed markets will increase investor protection by providing: (1) greater access to the market;
(2) increased liquidity; and (3) transparency of orders in the marketplace.
Ari Burstein
Assistant Counsel
Attachment