Institute Comments on the Regulation of Nasdaq-Listed Securities

Washington, DC, June 20, 2003 - The Institute filed a comment letter with the Securities and Exchange Commission on a concept release relating to the regulation of Nasdaq-listed securities.

Background
The SEC issued a May 14 concept release regarding the regulation and trading of Nasdaq-listed and exchange-listed securities. The concept release is in response to a petition from the Nasdaq Stock Market requesting that the Commission take certain actions to respond to, according to Nasdaq, the greater fragmentation of trading and regulation in Nasdaq-listed securities. The SEC published Nasdaq's petition to expedite and facilitate dialogue among all market participants on the issues raised by Nasdaq. In particular, Nasdaq requests that the Commission, among other things, establish uniform trading rules and address the exchanges' costs of regulation and self-regulatory structure.

The issues raised in the concept release are important, both for the proper functioning of the securities markets and the development of the future market structure.

ICI Position
The Institute filed a comment letter focusing on the issue most directly impacting institutional investors: the debate over uniform trading rules. ICI pointed out possible positive and negative impacts that uniform trading rules could exert on securities markets and investors. For example, we agree with Nasdaq that the Commission should ensure that all markets have rules adequate to address, among other things, activities prohibited by the Exchange Act, market manipulation, and compliance with the limit order display and firm quote rules. However, the Institute also believes uniformity might hinder competition and act to the detriment of investors. For example, in the listed market, certain uniform Intermarket Trading System ("ITS") trading rules have, arguably, created barriers to competition and have impeded efficient trade execution.

The Institute does not have a definitive view at this time as to the best approach to a self-regulatory model for markets, but believes in a strict separation of the self-regulatory role from the marketplace it oversees.

Related Links
For more information on other market-related issues affecting fund investors, visit the markets and investment advisers section of this website.