Effectiveness Of New Section 46 Of Article III Of The Rules Of Fair Practice Delayed Until September 15, 1994

Discussion

In Notice to Members 94-09, published in February 1994, the NASD announced Securities and Exchange Commission (SEC) approval of a new Section 46 of Article HI of the Rules of Fair Practice requiring members holding open orders to adjust the price and size of such orders by the amount of any dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest. The NASD announced that the effective date of the new rule would be May 15, 1994. The NASD is now announcing that the effective date of new Section 46 is being delayed from May 15, 1994, to September 15, 1994.

The NASD is planning updates of The Nasdaq Stock Market™ operating systems by, among other things, improving the features of the Small Order Execution System (SOES^SM)¹ and implementing the Advanced Computerized Execution System (ACES^®). These updates will include automatic repricing of open orders and will permit a member to comply with new Section 46 simply by placing such orders in the system. Notwithstanding the improvements these changes will provide, they will not be in place by May 15, 1994, the effective date of new Section 46. Therefore, the NASD is delaying the effective date of new Section 46 until The Nasdaq Stock Market system improvements permitting automatic repricing are implemented.

Questions regarding this Notice may be directed to Elliott R. Curzon, Senior Attorney, (202) 728-8451, or Robert J. Smith, Attorney, (202) 728-8176, Office of General Counsel.

¹ The NASD recently filed proposed rule change SR-NASD-94-13 to adopt a Nasdaq Primary Retail Order View and Execution System (N'PROVE). The N'PROVE System will replace SOES and will include an automatic repricing feature that will comply with the new Section 46.