Notice To Members 87-12

Adoption of Amendment to Schedule G of the NASD By-Laws

Published Date:

TO: All NASD Members and Other Interested Persons

EXECUTIVE SUMMARY

The SEC recently approved an amendment to Section 2 of Schedule G of the NASD By-Laws (SEC Release Number 34-23780). The amendment, which is effective immediately, requires NASD members to report transactions in listed securities executed in the over-the-counter market in the United States between 4:00 p.m. and 4:30 p.m. Eastern Time to the Consolidated Tape Association (CTA) through the NASDAQ System.

The amendment is in response to concern over the apparent lack of uniformity in reporting procedures for transactions in listed securities executed after hours.

The text of the amendment is attached.

BACKGROUND AND SUMMARY OF AMENDMENT

The amendment to Section 2 of Schedule G of the NASD By-Laws was adopted in response to concern over the apparent lack of uniformity in reporting procedures for transactions in listed securities executed after hours.

The purpose of the amendment is to standardize these reporting procedures for transactions in listed securities executed in the United States between the hours of 4:00 and 4:30 p.m. Eastern Time.

Some NASD members currently utilize NASDAQ facilities to report transactions in listed securities executed after the market close to CTA, while other NASD members report such transactions via the NASD's Form T. Form T is used to report trades executed after the close of CTA trading hours. It is submitted to the NASD on a weekly basis. While transactions reported through CTA are included in daily market activity summaries, information submitted on Form T is not.

Therefore, requiring that transactions in listed securities executed between 4:00 and 4:30 p.m. Eastern Time be reported to CTA through the NASDAQ System will ensure uniformity of reporting procedures. This will also result in the dissemination of more complete data on daily trading activity to the wire services and print media and, ultimately, to public investors.

It should be noted that transactions in exchange-listed securities executed outside exchange trading hours are considered over-the-counter transactions. Therefore, the amendment to Schedule G will apply to only domestic transactions in listed securities executed between 4:00 and 4:30 p.m. Eastern Time by NASD members, including those that are also members of a national securities exchange. However, the amendment does not address the reporting of transactions in listed securities executed abroad after the close.

Questions concerning this notice may be directed to S. William Broka, Vice President, NASDAQ Operations-Members, at (202) 728-8050.

Sincerely,

Frank J. Wilson
Executive Vice President
Legal and Compliance

Attachment

AMENDMENT TO SCHEDULE G OF THE NASD BY-LAWS*

(Effective Immediately)

SCHEDULE G

Section 2 — Transaction Reporting

(a) When and How Transaction Reported
(1) Designated Reporting Members shall transmit through the NASDAQ Transaction Reporting System, within 90 seconds after execution, last sale reports of transactions in eligible securities during the trading hours of the Consolidated Tape otherwise than on a national securities exchange. Designated Reporting Members shall transmit through the NASDAQ Transaction Reporting System, within 90 seconds after execution, last sale reports of transactions in eligible securities executed in the United States between 4;00 p.m. and 4:30 p.m. Eastern Time. Transactions not reported within 90 seconds after execution shall be designated as late.
(2) Non-Designated Reporting Members shall transmit through the Transaction Reporting System or, if such System is unavailable, via Telex, TWX or telephone, to the NASDAQ Department in New York City, within 90 seconds after execution, last sale reports of transactions in eligible securities executed during the trading hours of the Consolidated Tape otherwise than on a national securities exchange unless all of the following criteria are met:
(A) The aggregate number of shares of eligible securities which the member executed and is required to report does not exceed 1,000 shares in any one trading day;
(B) The total dollar amount of shares of eligible securities that the member executed and is required to report does not exceed $25,000 in any one trading day; and
(C) The member's transactions in eligible securities have not exceeded the limits of (A) or (B) above on five or more of the previous ten trading days.

Non-Designated Reporting Members shall transmit through the NASDAQ Reporting System, or if such System is unavailable, via Telex, TWX or telephone, to the NASDAQ Department in New York City, within 90 seconds after execution, last sale reports of transactions in eligible securities executed in the United States otherwise than on a national securities exchange between the hours of 4:00 p.m. and 4:30 p.m. Eastern Time unless all of the criteria specified in paragraphs (A), (B) and (C) above are met.

Transactions not reported within 90 seconds after execution shall be designated as late. If the member has reason to believe that its transactions in a given day will exceed the above limits, it shall report all transactions in eligible securities within 90 seconds after execution; in addition, if the member exceeds the above limits at any time during the trading day, it shall immediately report and designate as late any unreported transactions in eligible securities executed earlier that day.

(3) Non-Designated Reporting Members shall report weekly to the NASDAQ Department in New York City, on Form T, last sale reports of transactions in eligible securities that are not required by paragraph (2) to be reported within 90 seconds after execution.
(4) All members shall report weekly to the NASDAQ Department in New York City, on Form T, last sale reports of transactions in eligible securities executed outside the hours of 9:30 a.m. and 4;30 p.m. Eastern Time [trading hours of the Consolidated Tape].
(5) All trade tickets for transactions in eligible securities shall be time-stamped at the time of execution.

* New language is underlined; deleted language is bracketed.