[16136]
June 2, 2003
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 12-03
RE: SEC EXTENSION OF DE MINIMIS EXEMPTION TO TRADE-THROUGH RULES
The SEC has granted an extension of the de minimis exemption from the provisions of
the Intermarket Trading System Plan (“ITS Plan”) governing intermarket trade-throughs in
three exchange-traded funds: the Nasdaq-100 Index ETF (“QQQ”), the Dow Jones Industrial
Average ETF (“DIA”), and the Standard & Poor's 500 Index ETF (“SPY”).1 In particular, the
exemption permits transactions in these three ETFs to be effected at prices no more than three
cents worse than the national best bid and offer. The SEC order states that, in providing the
three cent de minimis exemption, the SEC believed that exempting these transactions from the
ITS trade-through provisions would provide investors with increased liquidity and expand the
choice of execution venues, while limiting the possibility that investors would receive
significantly inferior prices. The original exemption was to expire on June 4, 2003. The SEC
order extends the exemption for an additional nine months through March 4, 2004.
Ari Burstein
Associate Counsel
1 The SEC order can be found on the SEC’s website at http://www.sec.gov/rules/other/34-47950.htm.