Notice to Member Summaries Continued

NTM 06-03

In this notice the NASD provides guidance on Rule 2111 which prohibits members from trading ahead of customer market orders under certain circumstances.  The rule prohibits a firm from trading for its own account at prices that would satisfy a customer market order unless it immediately executes the customer order.

Rule 2111 applies both to all NASDAQ and exchange –listed securities to all firms that accept and hold customer orders market orders whether or not they are a market maker in the security.  However, not held and odd-lot orders would not be subject to the requirements of this rule.  The NASD has published a very detailed Questions and Answers relating to the application of the Rule 2111 which can be found in Notice to Members 06-03. RETURN TO INDEX