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Non-Tech : Tulipomania Blowoff Contest: Why and When will it end? -- Ignore unavailable to you. Want to Upgrade?

To: bobby beara who wrote (879)	1/26/1999 8:18:00 PM
From: Sir Auric Goldfinger	Respond to of 3543

NASD Regulators Issue Guidelines For Handling Net-Stock Volatility Dow Jones Newswires NEW YORK -- NASD Regulation Inc., the regulatory arm of the National Association of Securities Dealers, on Tuesday issued guidelines to brokerage forms that address how firms should handle order execution in volatile markets -- particularly in highflying Internet stocks. The NASD noted a marked increase in volatility of stocks and record trading levels during recent months and recommended that both online and traditional firms expand their disclosure statements. In a second move, the NASD laid out guidelines for firms on operating their order-execution systems and handling customer orders to meet best execution requirements amid intraday volatility and surging volumes. Both actions were put to brokerage firms in the form of a so-called Notice to Members. A companion bulletin for investors is available on the NASD Regulation Web site (www.nasdr.com). "Recent increased volatility and volume present new issues for investors, regardless of the method of trading," the NASD said in a press release. Internet stock volatility has been an increasing concern for Nasdaq market makers who are trading such high-flying, highly demanded stocks as Yahoo! Inc. and Amazon.com Inc. Other efforts are under way in the Nasdaq market division of the NASD and on Monday the U.S. Securities and Exchange Commission approved a proposal by a Nasdaq market subcommittee allowing a delay for volatile initial public offer stock openings. In the first notice to members, the NASD suggested that securities brokerages should outline the possibility of trading delays that arise amid high volumes, the differences between market orders and limit orders, the potential for market orders to rise sharply during IPOs, and the possibility of access problems due to high Internet or trading volumes. In addition, the NASD said that firms must not exaggerate their abilities to fulfill trading orders in advertising and sales literature. In a second notice addressing the market makers' obligation to provide the "best execution" of customer orders, the NASD said that firms should consider that procedures for handling customer orders must be fair, consistent and reasonable. Firms should disclose when order executions are being made differently during turbulent market conditions and that modified order executions are being implemented only when warranted by market conditions, the notice also stated. If a brokerage frequently activates an alternative order-execution process to compensate for inadequate systems amid high volumes, that could raise best-execution concerns, according to the notice. And the NASD said that failure to adequately staff an order-execution department doesn't justify executing at less than the best available market. Some of the steps market makers have taken in recent months amid the volatile markets include switching from an automatic-execution system on small orders to a manual system, and providing partial executions. Some firms also have raised margin requirements on Internet stocks, barred online trading of IPOs, stopped accepting market orders on IPOs, and added pop-up pages on Web sites on certain securities that provide additional disclosure.