This NASD proposal is long overdue and could help improve the market for OTC-BB. The requirement of a response, is IMHO perhaps the most important part.
NASD Proposes Automated Order Delivery for OTC Bulletin Board
Washington, Oct. 12 (Bloomberg) -- The National Association
of Securities Dealers wants to create an automated order delivery
system to handle surging orders on the over-the-counter penny
stock market known as the OTC Bulletin Board, according to an NASD
press release.
The electronic system, which requires approval from the
Securities and Exchange Commission, would promote a more efficient
market and enhance investor protection, the NASD said. It would
let users enter, cancel, correct, accept, decline or execute full
or partial orders, the NASD said. It would also enable market
participants to execute orders that, when delivered to a broker,
impose an obligation to respond.
Currently, all order delivery communication and negotiations
between two firms regarding trades on this market take place by
telephone.
``They're on the phone all day,'' said Adena Friedman, an
NASD vice president who oversees the OTC-bulletin board. ``If
volume is very heavy, it becomes unwieldy to try to do all those
executions over the phone. Sometimes phone lines are jammed and it
could take hours to execute a trade.''
Investors currently place their orders with firms by
telephone or online, which won't change if the new system is
adopted, Friedman said. The NASD hopes, though, that by making it
easier for the firms to communicate with each other by computer,
the system will provide a fairer market for all market
participants and all investors, especially during periods of
increased market activity.
Average daily share volume on the OTC Bulletin Board rose to
323 million in 1999 from 41 million in 1995, fueled by the growth
of online trading systems and a wealth of information about over-
the-counter securities on the Internet, the NASD said. In the
first quarter of this year, an average of more than one billion
shares were traded each day.
The NASD, which is also the parent of the Nasdaq Stock
Market, will submit its proposal to the SEC in the next month or
so, Friedman said.
`We expect the SEC to be supportive because a lot of
investors were hurt in the first quarter of 2000 because they
weren't able to get executions in a timely manner,'' Friedman
said. ``The SEC understands that isn't optimal from the investors
standpoint.''
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