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Nasdaq panel: no halts
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February 22, 1999: 3:29 p.m. ET
Issue of trading halts to go to full NASD board for vote next month
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NEW YORK (CNNfn) - A key panel has voted against trading halts on Nasdaq, setting the stage for what could be a close vote on the issue by the board of the stock market's parent body next month, officials said Monday.
The vote comes as a steep increase in the amount of trading Americans do online has led to wild price swings in some stocks traded on Nasdaq -- particularly Internet stocks -- and led to a surge in complaints to regulators.
Those developments have left the Nasdaq market and online brokers struggling to decide what steps should be taken, if any, to protect investors.
The vote against trading halts came Thursday at a meeting of Nasdaq's Quality of Markets Committee, a panel of 17 brokers, investors and others from the industry that advises Nasdaq's board on key issues facing the market. In addition to Internet stocks, Nasdaq is the home to many of the biggest and best- known technology stocks.
While the panel's vote was not a surprise -- a subcommittee had voted against using halts early this month -- it will be up to the full board of Nasdaq's parent to decide on the issue, a vote that could be too close to call.
"The committee met on Thursday and voted against trading halts," Nasdaq spokesman Scott Peterson said, adding the issue will still be taken up by the full board of the National Association of Securities Dealers, the parent of Nasdaq, at a meeting next month.
"We believe the issue is important enough to be considered by the entire NASD board of governors," he said.
The vote came despite support from some industry officials for some type of trading halts to help lessen volatility on Nasdaq.
NASD Chairman Frank Zarb last month asked the NASD board to consider implementing halts "when there appears to be significant corporate news or when a company's security is experiencing extraordinary volatility, either of which is impacting the fairness and orderliness of the market."
Some officials who have expressed support for halts said they expected Nasdaq eventually to approve them. But others said a vote by the NASD's board next month could be close, given the complex legal and regulatory issues involved.
The issue is an attempt by Nasdaq, which regulates itself, to stay ahead of new rules that federal officials might impose on the market to deal with the big jump in trading in Internet and other tech stocks.
That jump in trading, by traditional investors but especially by people trading online, has caused delays and other glitches that have angered thousands of investors who've been burned.
The issue became important enough to prompt Securities and Exchange Commission Chairman Arthur Levitt last month to take the unusual step of reminding people to do their homework about investing and the companies they buy online.
Levitt's statement -- and limits on trading Internet stocks imposed by some online brokers -- came after the SEC said investor complaints about online trading jumped fourfold in the year through last September.
Bernard Madoff, head of a trading firm that matches buyers and sellers on Nasdaq who supports the use of halts, predicts they will be approved eventually but says they won't be a cure-all.
"The halts aren't going to cure volatility, they're just going to limit it," he told CNNfn.
But others said the outcome of the vote by NASD's full board is far from certain. "There's a 50-50 chance" the halts will be approved, one person familiar with the situation said, noting that a host of technical and legal issues would need to be resolved.
One question is whether Nasdaq has legal authority to impose halts, power that may lie only with the Securities and Exchange Commission, one regulator said.
The New York Stock Exchange can halt trading since it clearly oversees the specialists who match buyers and sellers in the "open outcry" market, where buy and sell orders are matched on the exchange floor.
The Nasdaq market is composed of brokers communicating via computers and its authority, and ability, to halt trading is far less clear, some officials said.
Thursday's vote by the advisory panel was 9-4 against with four members not voting, one person familiar with the vote said. The NASD's 32-member board is due to consider the issue at its March 25 meeting.
-- by staff writer Steven Radwell 
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