FINRA Manual: Contents
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89-48 All Non-NASDAQ OTC Securities Are Subject To Price And Volume Reporting Effective September 1, 1989
*These are suggested departments only. Others may be appropriate for your firm.
Effective August 1, 1989, the requirement to report daily price and volume in non-NASDAQ OTC equity securities (NNOTC) pursuant to Schedule H to the NASD's By-Laws is extended to the entire universe of non-NASDAQ issues. This expands the group of securities subject to the electronic reporting requirement from the list of 5,700 National Securities Clearing Corporation cleared NNOTC securities that was established on September 1, 1988 to approximately 47,000 securities.
Notice to Members 88-54 announced the adoption of Schedule H to the NASD By-Laws, requiring the reporting of price and volume in non-NASDAQ over-the-counter equity securities. Specifically, all members executing principal transactions in NNOTC equity securities must electronically report if their aggregate daily volume of purchases or sales exceeds either a minimum of 50,000 shares or $10,000. Members that are NASDAQ subscribers must use their NASDAQ/Harris terminals, NASDAQ Workstations, or authorized foreign terminal emulations to report, while other firms must use the NASD's Automated Regulatory Reporting System (ARRS) to meet the electronic reporting mandate of Schedule H.
Schedule H is being implemented in two phases. Phase I, which began September 1, 1988, and is still in effect, requires the reporting of price and volume for the group of securities that were being cleared through the National Securities Clearing Corporation (NSCC) at the time Schedule H became effective.
PHASE II IMPLEMENTATION
The second and final implementation phase of Schedule H reporting becomes effective August 1, 1989. In Phase II, all NNOTC equity securities are subject to daily price and volume reporting pursuant to the requirements of Schedule H. Refer to the text of Schedule H and Notice to Members 88-54, herein incorporated, for more details as to the requirements and mechanics of NNOTC daily price and volume reporting.
It should be emphasized that all non-NASDAQ equity securities are now subject to the requirements of Schedule H, including foreign securities and preferreds.
Symbols for all NNOTC securities can be obtained through the automated symbol directory located on NASDAQ Level 2 and 3 terminals using the XDN.O command. For those firms using the NASD's ARRS system, symbols are available in a look-up table. Consult the NNOTC User Guide for help in use of either the NASDAQ or ARRS reporting vehicles.
For a security that meets the minimum threshold reporting criteria under Schedule H but for which you cannot locate a symbol in the automated directory, call Dottie Kennedy at (212) 858-4340 to obtain symbol information. Members are not relieved of this reporting requirement because of the apparent absence of a symbol in the directory. Similarly, for issue name changes, symbol conflicts, or any matter related to symbols, contact Ms. Kennedy.
For copies of the User Guide, assistance in reporting, or to ask any general questions, call the NNOTC hotline at (800) 321-NASD.
The price and volume reporting requirements under Schedule H were adopted to enhance the NASD's regulatory capabilities to routinely surveil for trading abuses in the NNOTC market. In this regard, an automated surveillance system has been implemented, thereby creating a centralized data base of price and transactions information that is subject to computerized analysis to detect violative practices and abuses such as manipulation, fraudulent pricing and markups, and other serious sales/trading practices.
Recently, the NASD has taken a number of enforcement actions as part of its increased efforts to eliminate fraud in the NNOTC securities market. In addition to carrying out its own investigations, the NASD routinely cooperates with other self-regulatory organizations, the SEC, and governmental law enforcement agencies. Several of these cooperative efforts have resulted in filing criminal charges relating to securities fraud. The NASD intends to continue cooperating with federal and state authorities as part of its efforts to vigorously enforce the securities law, particularly with regard to fraud and other serious sales practice abuses.