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September 30, 1998

The Proposed Rule Change

By Jeffrey L. Winograd

The National Association of Securities Dealers' filing with the Securities and Exchange Commission on riskless principal trade reporting proposes the following amendments to the current reporting requirements: Market makers would be exempted from reporting riskless principal trades in the Nasdaq National Market, the Nasdaq SmallCap Market, Nasdaq convertible-debt securities, and non-Nasdaq OTC equity securities. The rule is subject to SEC approval.

The rule's proposed new language follows, and is underlined; proposed deletions are in brackets:

Exception: A "riskless" principal transaction in which a member [that is not a market maker in the security], after having received [from a customer] an order to buy a security, purchases the security as principal [from another member or customer] at the same price to satisfy the order to buy, or, after having received [from a customer] an order to sell, sells the security as principal [to another member or customer] at the same price to satisfy the order to sell, shall be reported as one transaction in the same manner as an agency transaction, excluding the mark-up or mark-down, commission equivalent, or other fee.