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February 1, 1998

NASD OATS Deadline Extension Seems Likely

By Staff Reports

Under prodding by market makers, the National Association of Securities Dealers is proposing to push back its phase-in of a system designed to electronically capture more than two dozen trade details.

The first component of the Order Audit Trail System (OATS), the direct entry and capture of trade information, was originally to be implemented this August. Non-electronic procedures were to be covered starting Jan. 1, 1999, followed by all other orders on Jan. 31, 2000.

Under an amended proposal filed with the Securities and Exchange Commission, the NASD wants to push back the first phase to February 1999, the second phase to August 1999 and the final phase to July 31, 2000.

The original schedule was criticized by market makers because they said it strained their technology resources.

In addition, adopting the OATS requirements, mandated by the SEC, was making life difficult for traders coping with other major changes, such as the order handling rules.


As previously reported, the Securities Industry Association's OATS Ad Hoc Committee complained that more time was required to comply with the workload involving OATS.

"A technological undertaking of this kind requires more time [to program and to test]," stated the committee chairman, Bernard L. Madoff, in a letter to the SEC.

The SIA committee had warned that the original schedule put an unfair burden on small and medium-sized Nasdaq trading desks that were unlikely to have the order flow to run in-house audit-trail systems.

Their only option was to use service bureaus and their clearing firms, the committee stressed. Indeed, the real winners would be clearing firms that offer "one-stop shopping [for their correspondents]," the SIA committee maintained.

The SEC is expected to approve the NASD's revised OATS plan, according to industry sources.