The Financial Industry Regulatory Authority (FINRA) proposed to amend NASD Interpretive Material (IM) 2110-2, commonly referred to as the “Manning” Rule. The proposed amendments would allow member firms to calculate a current inside spread by contacting and obtaining priced quotations from at least two unaffiliated dealers for the purpose of determining the minimum price improvement obligation under “Manning” where there is no published current inside spread. The proposed changes are designed to address an “overly restrictive” result brought about by other recent changes to “Manning” that created tiered standards of price improvement (varying according to the price of a limit order) that are required in order to trade ahead of an unexecuted limit order. For example, under the recent changes, the Rule requires $0.01 price improvement when a member receives a $0.01 limit order if there is no current inside spread, thus effectively prohibiting the member from selling while the customer order is pending. In addition, the filing proposes amendments to allow a member firm to determine the current inside spread by using the best price obtained from at least two unaffiliated dealers on the other side of the quote when there is a one-sided quote.
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