[15319]
November 1, 2002
TO: ACCOUNTING/TREASURERS COMMITTEE No. 48-02
RE: NASDAQ PROPOSAL RELATING TO AN OFFICIAL CLOSING PRICE
Attached is a memorandum prepared by NASDAQ describing their proposal to
implement an “Official Closing Price.” 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
p.m. The normalized price is the last trade price within the concurrent BBO, adjusted up to the
concurrent bid if it is below the bid price (or down to the concurrent ask if it is above the ask
price).
NASDAQ is seeking input on how to handle cancellations and corrections submitted
after the close that impact the Official Closing Price and how to enable vendors to carry and
identify the Official Closing Price. If you have any comments on the proposal, please contact
the undersigned at 202/326-5851 or smith@ici.org.
Gregory M. Smith
Director - Operations/Compliance
& Fund Accounting
Attachment (in .pdf format)