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90-9 Mandatory Participation by Self-Clearing Firms in the Automated Confirmation Transaction (ACT) Service Begins March 1, 1990

SUGGESTED ROUTING*

Senior Management
Legal & Compliance
Operations
Systems
Trading

*These are suggested departments only. Others may be appropriate for your firm.

Participation in NASDAQ's Automated Confirmation Transaction (ACT) Service, which has been approved by the Securities and Exchange Commission, will become mandatory on March 1, 1990, for all self-clearing firms that are direct members of a registered clearing corporation. The service is designed to shorten the comparison cycle for telephone-negotiated trades in NASDAQ securities that are eligible for comparison processing through registered clearing corporations.

To participate in ACT, NASD members, with one exception, need NASDAQ-compatible equipment. The NASD Board has authorized, subject to filing with and approval by the SEC, the establishment of an ACT Service Desk to assist firms that do not have NASDAQ equipment and that have five or fewer NASDAQ trades per day, on average, per calendar quarter. The monthly cost will be $50 for each participant in addition to normal ACT charges.

BACKGROUND AND EXPLANATION

Notice to Members 89-76, which was circulated to the membership in December 1989, said that the NASD had developed an SEC-approved post-execution service (i.e., ACT) that reduces transaction risk and improves trade-processing efficiency. ACT locks in the post-execution steps for telephone-negotiated, street-side trades. These steps include transaction reporting for NASDAQ National Market System (NASDAQ/NMS) securities and the comparison and reporting of ACT-compared trades as "locked-in" to registered clearing corporations for all NASDAQ securities. The clearing corporations will report ACT trades to their members on their contract sheets the day after the trades have been compared.

ACT has been in a pilot phase since August 30, 1989, when five members began using the system with test securities. Currently, 25 members, of which five are computer-to-computer interface, are using the system, and all NASDAQ securities are included.

The NASD, in conjunction with Notice to Members 89-76, notified all members that receive NASDAQ Level 2/3 service and were direct-clearing participants of a registered clearing corporation of their responsibilities with respect to a mandatory implementation of ACT. Specifically, the NASD sent a letter along with contracts and a self-tutorial training program on a floppy disk to these members. These contracts, if they have not already been returned to the NASD's Member & Market Data Services Section, 9513 Key West Avenue, Rockville, Maryland 20850-3389, should be completed and returned as soon as possible. A member's participation in ACT cannot begin until its contract has been duly executed and returned to the NASD. If you have not received an ACT contract, you should contact Subscriber Services at (301) 948-6162.

Those NASD members meeting the previously mentioned criteria and averaging less than five interdealer transactions per day on a calendar quarter may use an ACT Service Desk alternative participation once it becomes effective. The NASD Board of Governors approved the ACT Service Desk in January 1990.

The current SEC-approved fees, which were detailed in a letter sent to all self-clearing firms with NASDAQ-compatible equipment, are now under review, and it is likely that these fees will be reduced.

For additional information concerning the ACT Service, call Donald Catapano or Rodney Dawson at (212) 858-4353.


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