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NASD BOARD OF GOVERNORS ADOPTS SHORT SALE RULE FOR NASDAQ/NMS SECURITIES

           NASD BOARD OF GOVERNORS ADOPTS SHORT SALE RULE
                      FOR NASDAQ/NMS SECURITIES
    WASHINGTON, Nov. 18 /PRNewswire/ -- The board of governors of the National Association of Securities Dealers, Inc. (NASD), has approved the adoption of a short sale rule for Nasdaq National Market System (Nasdaq/NMS) securities.  The rule, which will contain an exemption for qualified market makers, will be submitted to the NASD membership for vote and, if approved, thereafter filed with the Securities and Exchange Commission (SEC) for its consideration and approval.
    The proposed rule was recommended to the NASD board for adoption by a broad base of its constituents, including its Issuer Affairs, Institutional Investors, Corporate Financing, and Trading committees as well as by the Nasdaq Corporate Advisory Board which is composed of chief executive officers of companies whose securities are traded in Nasdaq/NMS.
    "The NASD board took this action," said NASD President and Chief Executive Officer, Joseph R. Hardiman, "to prevent improper or demoralizing short selling activity that adversely affects the pricing efficiency of the Nasdaq market.  In large measure, the proposed rule will have the same impact on trading in Nasdaq/NMS securities as SEC Rule 10a-1 currently has on exchange-listed securities.  As a result, the board's action will equalize the short sale regulation of Nasdaq/NMS securities with that imposed by the SEC on exchange-listed issues."
    This NASD board's approval of a short sale rule for Nasdaq/NMS securities follows other steps it has taken over the past five years to govern the conduct of short selling in The Nasdaq Stock Market. These steps include:  monthly reporting of short interest in Nasdaq securities; requiring, before a short sale is executed for customer accounts, that an affirmative determination be made that the security can be borrowed and delivered; and requiring that buy-in transactions for customer accounts be for cash or guaranteed delivery.
    As approved by the NASD board, the proposed short sale rule will incorporate the following elements:
    -- The rule would be based on the inside bid as displayed in the Nasdaq system.
    -- Short sales would be prohibited at or below the bid when the current bid is lower than the preceding bid (short sales could be made at all times by offering stock at prices higher than the bid).
    -- Qualified market makers would be exempted from the provisions of the rule.
    -- Market makers could not use their exemption to bypass the rule for customer orders.
    -- Exemptions, where applicable, would track SEC Rule 10a-1 for short sales in exchange-listed securities.
    -- The rule would be effective during normal, domestic market hours (i.e., 9:30 a.m.-4 p.m. ET).
    Simultaneous with the submission to the SEC of a short sale rule applicable to NASD members, the NASD will petition the SEC to amend Rule 10a-1 to include Nasdaq/NMS securities so that short sale restrictions would apply directly to all market participants.
    The NASD is the largest self-regulatory organization of the U.S. securities industry, with 5,500 member firms and 415,000 industry professionals registered with it.  It operates and regulates four markets:  The Nasdaq Stock Market, the second largest equity market in the United States; the OTC Bulletin Board for the over-the-counter market; the PORTAL Market for private placements; and Nasdaq International, slated for start-up in January 1992.
    -0-                      11/18/91
    /CONTACT:  Gene Finn, 202-728-8243, or Robert Ferri, 202-728-8955, both of the National Association of Securities Dealers, Inc./ CO:  National Association of Securities Dealers, Inc. ST:  District of Columbia IN:  FIN SU: SB -- DC024 -- 4539 11/18/91 14:28 EST
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Publication:PR Newswire
Date:Nov 18, 1991
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