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Technology Stocks : Xilinx (XLNX) -- Ignore unavailable to you. Want to Upgrade?

To: privatesmith who wrote (1670)	3/18/1998 7:10:00 PM
From: Stu	Read Replies (1) \| Respond to of 3291

OFF TOPIC Some info about the NASDAQ trading system. It's something of a sales pitch for the NASDAQ. The beginning is interesting, but it trails off from there. Trading Through NASDAQ In the past when a stock was quoted 18 to 18«, a customer generally was able to buy only at 18« and sell at 18. Thus, a customer might be trying to buy stock at 18¬ and would not be successful even though the dealer might be buying ahead of the customer at 18 and selling at 18«. Occasionally, especially toward the end of the trading day, a few customers would receive a better execution on limit orders as the dealers tried to flatten their positions. Contrary to popular belief, most makers are risk averse and would prefer to end the day without inventory. NASDAQ Today At the present time, Nasdaq continues to display dealer quotes; however, certain rules (one in particular -- called the Manning Rule) have improved the retail customer's chance of execution. Today a dealer may not buy or sell ahead of a customer. For example, if a stock is quoted 18 to 18« and the dealer holds a customer to buy 300 shares at 18¬, the dealer may not buy any amount at 18 without satisfying the customer first. Because of fragmentation (there may be from 2 to 70 dealers in a stock), it is possible to have the stock trade through one's price and not receive an execution. Better Than Industry-Standard Execution Because of our selection of dealers who are among the largest in the industry and our insistence on quality executions, our customers are afforded additional chances of execution through Manning protection, price improvement, and price discovery. Manning Protection The dealer who executes our customer's orders provides Manning protection on limit orders -- the dealer will not trade ahead of retail customer limit orders and: Will not trade at the same price or a better price than a retail customer limit order it holds without protecting the limit order -- regardless of the order's size or origin. Will execute the limit order, in full or in part, to the extent that it trades at the limit order price, at a price lower than a limit order, or at a price higher than a limit order to sell. Price Improvement The dealer's Price Improvement Product uses the newest technology to obtain the best possible price for our customers. The following steps occur in less than 90 seconds and, if no better price is found, our customers are still guaranteed the best inside market price at the time the order was received. 1.All market or executable limit orders greater than 100 shares and with a spread of 1/8th or greater are stopped at the best inside market. 2.The order is matched against the dealer's open order file, giving a full or partial improved execution when possible. 3.The order is checked against the resting orders on SelectNet in an attempt to improve all or part of the remaining order. 4.During the search for an improved price, if the stock price moves against our customer, he/she is guaranteed the best inside market price at the time the order was received. Price Discovery All limit orders over 2,000 shares with a spread greater than 1/8th are eligible for price discovery, and the price will be reflected in the quote. For example: The bid and ask is 18 - 18«. Our customer has an order to buy 2,000 at 18¬. The new market will be 18¬ - 18«. Innovations On August 28, 1996, the Securities and Exchange Commission (SEC) adopted new rules governing the handling and execution of customer orders that significantly change the way customer orders are handled in all markets. This is not about fine-tuning or enhancing an existing system; the SEC is changing the entire Nasdaq market structure. The rules adopted in August: Require firms to publicly display all investor limit orders larger than 99 shares but not larger than 10,000 shares. Require dealers to include investor limit orders when the investor matches the best price. Require specialists and market makers to publicly quote any "best" prices quoted in private trading systems, including Instinet and Nasdaq's own SelectNet. Thus, instead of having a fragmented marketplace where "tradethroughs" occur and customer orders are not required to be reflected in the quotes, there is a central limit order file with quote systems fully reflecting the customer's best bid or offer. This Limit Order Display Rule became effective in early January 1997 for about 50 securities with the highest average daily trading volume in the previous quarter. The ruling will affect increasingly more stocks throughout the year. Industry delays may be expected because major software rewrites are required. However, regardless of whatever legislation is proposed or implemented, our customers can be assured of the best execution available. We anticipate that our execution sources will continue to use price discovery and price improvement mechanisms when spreads are unusually wide.