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Non-Tech : Market Makers - What They Do and How They Do It -- Ignore unavailable to you. Want to Upgrade?

To: Jack of All Trades who wrote (165)	2/6/1999 2:57:00 PM
From: lindalib	Respond to of 429

This hasn't affected the secondaries yet, has it? Is it the way of the future? Are we to miss our early morning run-up's? On January 22, 1999, the Securities and Exchange Commission (SEC) approved SR-NASD-98-98, granting a request from The Nasdaq Stock Market, Inc. to expand to 15 minutes the pre-trading initial quotation window for Market Maker quotes in securities newly released for trading in Nasdaq® (see SEC Release No. 34-40968). The new rule will become effective Tuesday, January 26, 1999. Nasdaq sought an expansion of the current five-minute quotation period in response to significant increased volatility during the opening of trading in initial public offerings (IPOs) in its market. Nasdaq believes that an increase in the length of the pre-trading quotation window will give market participants time to more accurately gauge and respond to IPO market price indications before the start of trading and reduce the incidence of locked or crossed quotations in those securities. Under the new procedures, Nasdaq MarketWatch staff will monitor quotation activity during the original 15-minute pre-trading period to determine whether an additional fifteen minute quotation-only period is necessary before trading in an IPO-security may begin. The determination of MarketWatch will be based solely upon whether a market is locked or crossed to such an extent that releasing the IPO security for trading will be detrimental to the market or investors. Although MarketWatch will closely monitor pre-trading quotation activity during the entire fifteen minute period, the determination of MarketWatch will be predicated on the status of the market at the expiration of the initial fifteen minute period. At the conclusion of the second 15-minute quotation period trading in the IPO will commence regardless of the state of the market. The new rule, however, may be a short-term solution only. Nasdaq continues to explore other options for the long-term. Nasdaq is aiming towards an increased communication level that will allow participants to be better informed and permit the IPO to reach an equilibrium price level more rapidly. Because the situation is so dynamic, Nasdaq cannot afford to wait for the long-term solutions, and has thus established this temporary measure. With the 15-minute quotation window, and any future solutions to the volatility issue, the underlying goal is a strong desire to reduce the discord and miscommunications within the trading environment surrounding IPOs. Most importantly with the new rule, potential risks are minimal, as member firms have programmed systems that trade automatically following a release by Nasdaq, and a simple time addition and facilitated communication, from all vantage points, can do no harm.