April 23, 2014
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NASDAQ Proposes to Extend Limit Order Protection to all OTCBB Securities

The Nasdaq Stock Market, Inc. ("Nasdaq") has filed with the Securities and Exchange Commission ("SEC") a proposal to establish as permanent two pilot programs currently contained in NASD Rule 6541. Rule 6541, which prohibits member firms from trading ahead of customer limit orders in designated OTC Bulletin Board ("OTCBB") securities, was established on a pilot basis for approximately 325 securities quoted on the OTCBB. Nasdaq believes it is in investors’ best interests to permanently extend the protection offered by NASD Rule 6541 to all securities quoted on the OTCBB.

The limit order protection embodied in Rule 6541 is an investor protection tool based on NASD IM-2110-2 (commonly known as the "Manning Rule"). In Manning, the NASD found and the SEC affirmed that a member firm that accepts a customer limit order has a fiduciary duty not to trade for its own account at prices more favorable than the customer order. Rule 6541 expands to securities traded on the OTCBB, the protections that IM-2110-2 provides to trading of Nasdaq National Market and SmallCap securities.

SR-NASD-2002-153; Limit Order Protection for all OTCBB Issues (pdf)


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