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87-85 SEC Approves Revised Rules for Reporting NASDAQ/NMS Trades Executed Between 4 p.m. and 5 p.m. Under Schedule D to the NASD By-Laws

TO: All NASD Members and Level 2 and Level 3 Subscribers

The Securities and Exchange Commission has approved amendments to Schedule D to the NASD's By-Laws with respect to reporting trades in NASDAQ National Market System (NASDAQ/NMS) securities.

Under the amendments, which become effective January 8, 1988, orders that are executed between 4 p.m. and 5 p.m., Eastern Time, are to be reported through the NASDAQ System. Transaction reports can be made between 4:10 p.m. and 5 p.m. and must be identified by appending a ".T" to the trade report. The ".T" function cannot be used prior to 4:10 p.m.

Currently, Section 2 of Part XII of Schedule D to the NASD By-Laws requires transactions in NASDAQ/NMS securities that are executed outside the hours of operation of the transaction reporting system (that is, outside the hours of 9:30 a.m. and 4 p.m., Eastern Time) are to be reported to the NASD on a weekly basis, via Form T. Information submitted on the weekly Form T is not included, however, in daily market activity summaries and is not currently integrated into the NASD's automated surveillance systems.

The NASD believes that requiring last-sale reports to the System of transactions in NASDAQ/NMS securities executed between 4 p.m. and 5 p.m., Eastern Time, will capture approximately 80 percent of the transactions that are executed after the close of the market. This requirement will increase the scope and effectiveness of the NASD's automated surveillance programs, permit the dissemination of more accurate information to the news media with respect to daily trading volume, and lessen the manual reporting burden currently placed on members having to submit Form T.

The required last-sale reports will affect only daily volume totals. The amendments do not affect the calculation of daily high, low, and last-sale prices, which will continue to be established as of the close of the market.

Members should continue to submit Form T to the NASD on a weekly basis for transactions in NASDAQ/NMS securities occurring after 5 p.m. and prior to 9:30 a.m.

The text of the amendments to Part XII, Section 2 of Schedule D to the NASD By-Laws is attached.

Questions concerning this notice should be directed to NASDAQ Operations—Members at (212) 839-62 11.

Sincerely,

John T. Wall
Executive Vice President
Member and Market Services

Attachment

AMENDMENTS TO NASD BY-LAWS

SCHEDULE D

PART XII

REPORTING TRANSACTIONS IN NASDAQ NATIONAL MARKET SYSTEM DESIGNATED SECURITIES

(a) When and How Transaction Reported
(1) Registered Reporting Market Makers shall transmit through the Transaction Reporting System, within 90 seconds after execution, last-sale reports of transactions in designated securities executed during the hours of the Transaction Reporting System. Transactions not reported within 90 seconds after execution shall be designated as late.
(2) Non-Registered Reporting Members shall transmit through the Transaction Reporting System or, if such System is unavailable, via Telex, TWX, or telephone, to the NASDAQ Operations Department in New York City, within 90 seconds after execution, last-sale reports of transactions in designated securities executed during the trading hours of the Transaction Reporting System unless all of the following criteria are met:
(A) The aggregate number of shares of designated securities that the member executed and is required to report during the trading day does not exceed 1,000 shares; and
(B) The total dollar amount of shares of designated securities that the member executed and is required to report during the trading day does not exceed $25,000; and
(C) The member's transactions in designated securities have not exceeded the limits of (A) or (B) above on five or more of the previous 10 trading days.
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 designated 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 designated securities executed earlier that day.
(3) Non-Registered Reporting Members shall report weekly to the NASDAQ Operations Department in New York City, on a form designated by the Board of Governors, last-sale reports of transactions in designated securities that are not required by paragraph (2) to be reported within 90 seconds after execution.
(4) Last-sale reports of transactions in designated securities executed between the hours of 4 p.m. and 5 p.m. Eastern Time shall be transmitted through the Transaction Reporting System no later than 5 p.m. Eastern Time.
(5) All members shall report weekly to the NASDAQ Operations Department in New York City, on a form designated by the Board of Governors, last- sale reports of transactions in designated securities executed outside the hours of 9:30 a.m. and 5 p.m. Eastern Time (during the trading hours of the Transaction Reporting System).
(6) All trade tickets for transactions in eligible securities shall be time- stamped at the time of execution.

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