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Nasdaq OKs trading halts
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March 25, 1999: 6:19 p.m. ET
In snub to advisors, NASD votes to stop trades without telling company first
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NEW YORK (CNNfn) - Officials at the Nasdaq stock market approved a new rule Thursday that will let the exchange halt trading of a company's stock before notifying the company itself.
Overruling its own advisory panel, the National Association of Securities Dealers board voted to allow regulators to stop trading any time there is news that affects the ability of investors to conduct "fair and orderly" trades.
Nasdaq said the policy will help regulators react quickly to prevent the dissemination of partial or false information from causing a stock price to swing.
"By removing this sometimes time-consuming requirement, our surveillance team will be able to act more quickly," Nasdaq President Alfred Berkeley said in a statement.
Under previous rules, Nasdaq officials were required to contact the issuer of a stock before it could halt trading of shares -- regardless of what information was driving a price swing.
The Securities and Exchange Commission must approve the NASD-backed changes.
Last month, Nasdaq's Quality of Markets Committee, an advisory panel of 17 brokers, investors and others in the securities industry, recommended against such trading halts.
The action comes against the backdrop of a boom in Internet-based stock trading and the advent of "day trading," in which investors try to cash in on small price moves in a security -- often making many trades a day.
The online trading phenomenon has in part fueled a rash of volatility among many Nasdaq -- mainly Internet-related -- stocks.
The NASD, the parent company of the Nasdaq, tabled a second, more sweeping proposal to allow trading halts at the discretion of exchange officials. An NASD spokesman said he did not know when or whether it would come back up for a vote.
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