Nasdaq Decimalization Testing & Decimalization Implementation Phase-In Plan

Decimalization

Executive Summary

Initial plans for Nasdaq^® decimalization testing are included in this Notice to Members. Also, a summary is provided of the industry critical dates.

Questions/Further Information

Questions regarding this Notice to Members may be directed to the National Association of Securities Dealers, Inc. (NASD^®) Decimalization Program Management Office (DPMO) toll free at: (888) 227-1330 or via e-mail at [email protected].

For the most recent decimalization news and developments, visit the NASD Web Site (www.nasd.com) and click on the decimalization link. Additional decimalization information is available on the Securities Industry Association (SIA) Web Site (www.sia.com).

Nasdaq Decimalization Testing

In accordance with NASD Rule 3420, some market makers and clearing firms must conduct decimalization testing. Selected firms will be notified in December 2000 by the NASD and will be given more information at that time on their testing requirements.

Point-to-Point - Limited point-topoint testing will begin mid-December 2000 with full testing beginning January 2001 and continuing through April 6, 2001.

Extended Point-to-Point - Testing will take place on January 27 and February 10, 2001. In order to participate, firms will need to successfully complete point-to-point testing and will be required to register at least 48 hours in advance. Testing will be scripted in the morning, and unscripted in the afternoon.

Full testing information will be available by December 1, 2000.

NASD & Exchanges' Decimalization Implementation Plan

On July 24, 2000, the national securities exchanges and the NASD submitted a comprehensive phase-in plan for decimal pricing in equity securities and options.

Details of the plan are shown in the table below.

To view the complete plan, visit the Securities and Exchange Commission (SEC) Web Site located at www.sec.gov (www.sec.gov/rules/othern/decimalp.htm).

The SEC has not given final approval to the plan.