NASD Regulation has fined 10 firms and suspended five of them from market making activities in the immediate after-market of initial public offerings for rule violations.

NASDR says the sanctioned firms caused the markets to lock and cross at the opening of secondary trading, and the disciplinary actions announced today resulted from violations of the NASD’s locked and crossed markets rule.

Markets become locked and crossed when a market maker enters or maintains an “ask” price for a security that is the same or lower than the “bid” price of another market maker.

Locked or crossed quotations may occur in fast-moving markets and can have significant impact on the opening of trading in newly offered securities. Many secondary trading markets were opening crossed by several points and in some cases, the locked or crossed condition existed for many minutes into the initial secondary trading period.

Locked and crossed markets adversely effect an orderly market opening and efficient price discovery because many firms do not execute customer orders during locked and crossed markets or execute such orders at unfavorable prices.

The recent disciplinary actions result from a NASDR review of market maker quotations from March 1, 1999, through June 15, 1999. Monetary sanctions in the 10 settled actions total US$473,000. These firms have neither admitted nor denied the allegations, but have consented to the entry of findings pursuant to the settlements.

The following firms were censured and fined by NASDR: Fleet Securities Inc., US$50,000; NDB Capital Markets LP, US$250,000; Herzog, Heine, Geduld, Inc., US$18,000; Schwab Capital Markets, US$12,000; and Spear, Leeds & Kellogg, US$10,000.

In addition to a fine, NASDR suspended five of the 10 firms from participating as a market maker in the trading of a security that has just completed an IPO from the beginning of secondary trading through the end of normal business hours on the next trade date. The firms will be suspended for periods of 10 through 30 business days.

Access Securities Inc. received a US$14,000 fine and a 30-business-day suspension; Aegis Capital Corp., US$19,000 and a 10-business-day suspension; Dalton Kent Securities Group, Inc., US$25,000 and a 30-business-day suspension; Ramius Securities L.L.C., US$61,000 and a 10-business-day suspension; and Torrey Pines Securities, Inc., US$14,000 and a 30-business-day suspension.

In the past 18 months, NASDR has brought approximately 35 cases for locked and crossed markets violations.