NASD Testing Bond Notification Procedure

August 4, 2004 ( - The National Association of Securities Dealers (NASD) has scheduled a test for its bond halt-trading notification system.

NASD will test the alert system on Thursday at 2 p.m. EDT. Among the information included in an alert to halt trading are the issuer’s trading symbol, a CUSIP for the security, the date and time of the move and the reason for the halt, Reuters is reporting.

Impetus for the test and possible changes to the system, came in March 2003 when the Securities and Exchange Commission (SEC) accused HealthSouth Corp. and suspended trading in the company’s securities.   However, company’s bonds continued to be traded because some investors thought the order applied only to HealthSouth shares. Later in the session, NASD told investors that the SEC order applied to the company’s bonds as well and investors were forced to unwind their trades.

“Investors were really upset – some had thought they sold the bonds at 60 cents on the dollar before they hit their lowest point, and the trades were reversed,” Premila Peters, health care analyst at KDP Advisors in Montpelier, Vermont told Reuters.

During Thursday’s scheduled test, if NASD needs to halt trading in a bond, it will send out alerts via its trading data feed, through e-mail messages to people who request notification and via alerts on Reuters News and information terminals and Bloomberg Professional Service. The information also will be posted on the NASD’s Web site.