[15273]
October 17, 2002
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 27-02
RE: NASDAQ PROPOSAL RELATING TO AN OFFICIAL CLOSING PRICE
As discussed at the recent Equity Markets Advisory Committee meeting, Nasdaq has
proposed the implementation of a new “Official Closing Price.” Attached is a memorandum
prepared by Nasdaq describing the Official Closing Price and soliciting the Committee’s input
on several open issues relating to its implementation.
As you know, Nasdaq currently does not have an official closing price and instead uses
the “last sale” as the measure of the close. Nasdaq, however, believes that the last sale is an
imperfect measure of the market at the close. Among other things, Nasdaq is concerned that it
is possible for market participants to affect the last sale with slowly reported transactions. In
addition, Nasdaq is concerned that the recent increase in trading of Nasdaq securities by UTP
exchanges raises issues regarding the viability of the current last sales, as the inclusion of
trading activity outside of Nasdaq’s regulatory oversight limits its ability to monitor the close
for manipulative activity.
To address these concerns, Nasdaq’s proposal would adopt an Official Closing Price
equal to the normalized price of the last unmodified trade reported to ACT at or before 4:00:02
PM. The normalized price is the last trade price within the concurrent BBO, adjusted up to the
concurrent bid (down to the ask) if it is below the bid (above the ask) price. Among the issues
that Nasdaq is seeking input from the Equity Markets Advisory Committee is how to handle
cancellations and corrections after the close that impact the Official Closing Price and how to
enable vendors to carry the Official Closing Price.
If you have any comments on Nasdaq’s Official Closing Price proposal, please contact
me by phone at 202-371-5408 or by e-mail at aburstein@ici.org.
Ari Burstein
Associate Counsel
Attachment (in .pdf format)