Latin American Capital Markets

PROMOTING REGIONAL CAPITAL MARKET INTEGRATION 181of the quotation sizes of all responsible brokers and dealers. Each exchange must alsobe able to identify and disclose to other members of that exchange the brokers ordealers making the relevant quotes. A series of important amendments to the quoterule have been made in order to improve the handling and execution of customerorders by brokers and dealers. 30 These concern so-called electronic communicationsnetworks and alternative trading systems.The third key rule created to implement the NMS, the display rule, requiresthat if a vendor disseminates last-sale data for securities subject to mandatory tradereporting, it must distribute the consolidated price, consolidated volume, and identifierindicating the market center where trades occur 31 Similarly, a vendor disseminatingquotation information must distribute consolidated quotation information including thebest bid and offer for such a security, the quotation size or aggregate quotation size associatedwith the best bid and offer, and identifiers indicating the market centers thatreported these quotes or a quotation montage from all other reporting centers.The consolidated price and volume is the price and volume of the most recenttransaction from all reporting market centers.The best bid and offer for listedsecurities is the highest bid or lowest offer quoted by any reporting center, with bidsand offers of equal values ranked first by size and then by time for exchange-listed securities.A quotation montage shows best bids and offers from all reporting marketcenters.Two key institutions were developed to coordinate information disseminationin the NMS: the Consolidated Quotation System (CQS) and the ConsolidatedTape Association (CTA).The CQS was established to implement the firm quotationrule. 32 It is a mechanism for making available to data vendors information about thebid and offer quotations and associated volumes for eligible securities from the marketsthat participate in the NMS.The bid and ask quotes from all the exchanges arecombined to obtain a consolidated best bid and offerThe CQS disseminates both thebest bid and offer and all the quotes provided by all the participants. The source ofeach quote and the relevant exchange or market maker are also identified.An operating committee composed of one representative from each planparticipant, namely each exchange and the National Association of Securities Dealers(NASD), administers the CQS. Each participant has one vote on the committee, andamendments to the CQS plan require unanimity.The participants share in the incomeand expenses associated with publishing the quotation information. Any net income30 US. SEC Release No. 34-37619 (August 29, 1996).31 240.IIAcl-ZC.FR.32 See CQS (December 1995).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub