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Rule Shines Light On Nasdaq Dealers

Traders Magazine, December 2001

Peter Chapman

Statistics released by Nasdaq market makers in the first round of best execution reports proved to be a mixed bag, but some desks stood out. Under the Securities and Exchange Commission's Rule 11Ac1-5, all Nasdaq dealers are required to provide their customers with certain standard measures of execution quality each month. The data, designed to assist brokers making routing decisions, will also be used by regulators. The most watched measure is the effective spread. It is a calculation of the difference between an execution price and the mid-point of the NBBO. Based on small trades made in Nasdaq 100 stocks by the 50 largest dealers last October, most spreads ranged from 1.5 cents to 2.5 cents.

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