NASD Exec to Propose Test of Trading Halts

National Assn. of Securities Dealers Chairman Frank Zarb will ask the group’s board next month to let the Nasdaq Stock Market impose trading halts on volatile stocks under a one-year pilot program, the NASD said Friday.

“This would allow Nasdaq to halt trading immediately when there appears to be significant corporate news or when a company’s security is experiencing extraordinary volatility, either of which is impacting the fairness and orderliness of the market,” the NASD said in a fact sheet.

The sheet gives the first public indication that Zarb, whose views carry great weight with the NASD board, supports a trading halt for volatile stocks. Under the proposal, NASD would evaluate the program after a year.

The pilot program would revive--in scaled-back form--a notion rejected last week by a Nasdaq subcommittee. Some brokerages and institutional traders on that panel had argued that a trading halt could worsen volatility and trap investors during a falling market.

Before the NASD board considers Zarb’s proposal, another Nasdaq panel, an advisory committee called the quality of markets committee, will consider it Feb. 18, Nasdaq officials said. This committee can influence the NASD board, but can’t stop it from voting on the proposal at Zarb’s request.

NASD President Rick Ketchum said that, under the proposal, the decision to halt trading would be left to at least three senior Nasdaq executives: Chief Operating Officer Patrick Campbell, Executive Vice President Glen Shipway and himself. No duration has been determined for the halts.