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To: Darth Trader who wrote (3146)	2/22/1998 3:36:00 PM
From: Hawk River Trading	Read Replies (1) \| Respond to of 12617

Started By: +Hawk River Trading Date: Feb 22 1998 3:33PM EST Replies: 0 Be advised....traders I would like to see some input to this subject so I have attached the following notice below MEMO : Head Trader Alert #1998-6 - February 10, 1998 Modification to SOES when an ECN or UTP Exchange is Alone at the Inside In January 1997, Nasdaqr modified the Small Order Execution SystemSM (SOESSM) to return orders to the entering firm when an Electronic Communications Network (ECN) or Unlisted Trading Privileges (UTP) participant was alone creating the Nasdaq inside market in a Nasdaq National Marketr (NNM) security. This was necessary because ECNs asserted that participation in an automatic execution system such as SOES might expose them to the risk of double executions--one from within the ECN and another through SOES--causing the ECN to take a principal position. The unintended consequence of last year's modification is that an ECN can effectively halt SOES executions by canceling all pending orders for a security as well as rejecting new incoming orders. This disruption in the processing of SOES orders creates a potential advantage in SOES for a customer to jump ahead of other SOES orders that might have executed first in that issue if they had not been rejected. To address concerns associated with the rejection of SOES orders, Nasdaq is implementing the changes described below to preserve the sequence of orders processed through SOES. Effective Monday, February 23, 1998, SOES orders will no longer be immediately returned when an ECN or UTP participant is alone at the inside (i.e., there are no Market Makers at the inside quote), in an NNM security. Now, SOES orders will be held in queue until executable for a specified period of time, initially set at 90 seconds. This "hold time" will give the market three options: 1) allow the ECN to move away, creating a new inside; 2) give the Market Makers time to adjust their quotes to create a new inside; or 3) allow the Market Maker to join the ECN at their price. If one of these events happens prior to the end of the ninety seconds, the order will either execute or be rejected if it is no longer executable. If none of these conditions occur, however, the order will time out at the end of the 90 seconds and be returned to the entering firm. NASDr Rule 4730 is being amended accordingly. Please note that SmallCap securities will continue to execute against the next available SOES Market Maker at the ECN price. If you have any questions about this change, please contact Andrew S. Margolin, Senior Attorney, Nasdaq Office of General Counsel, at (202) 728-8869.