Manning Rules Again.

Traders, December, 2005 by Chapman, Peter

A new NASD rule set to go into effect next month will cut into the profitability of Nasdaq market makers.

The NASD recently received approval from the Securities and Exchange Commission to extend Manning limit order protection to market orders. The new Rule 2111 prohibits a dealer from trading for its own account ahead of a customer's market order.

"If a firm accepts and holds a market order," Richard Wallace, the NASD's chief counsel, told a recent gathering of trading officials, "it cannot trade on the same side of the market. It must immediately offer the customer a fill at the same price."

The ruling, effective January 6, extends the protections given to customer limit orders 10 years ago. Then, the so-called Manning Rule was made...

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