SEC Approves Application of NASD’s Manning Rule to all NASD Members
On April 14, 2006, the SEC approved amendments to NASD Interpretive Material 2110-2, which is known as the "Manning Rule." The amendments clarify that the Manning Rule applies to every NASD member firm, regardless of whether the firm is trading in a market making capacity.
The Manning Rule generally prohibits a member from trading for its own account at a price that is equal to or better than an unexecuted customer limit order in the same security, unless the member immediately thereafter executes the customer limit order either at the price at which it traded for its own account or at a better price. In addition, the Manning Rule specifically states that all members accepting customer limit orders have a best execution obligation to those customers regardless of whether the orders are executed through the member itself or sent to another member for execution.
View the SEC’s notice of the proposed rule change
Securities Industry FYI is a service of the Broker-Dealer Practice of Morgan Lewis. If you have any questions concerning these important legal developments, please contact any member of Morgan Lewis’s Broker-Dealer Practice, including:
Washington, D.C.
Mark Fitterman
202.739.5019
mfitterman@morganlewis.com