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<TD><FONT face=verdana,arial,helvetica,san-serif size=1>Date:</FONT></TD>
<TD><FONT face=verdana,arial,helvetica,san-serif
size=1>04/24/2000</FONT></TD></TR>
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<TD><FONT face=verdana,arial,helvetica,san-serif size=1>To:</FONT></TD>
<TD><FONT face=verdana,arial,helvetica,san-serif size=1>ALL MEMBERS AND
MEMBER ORGANIZATIONS</FONT></TD></TR>
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<TD><FONT face=verdana,arial,helvetica,san-serif
size=1>Attention:</FONT></TD>
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<TD><FONT face=verdana,arial,helvetica,san-serif size=1>Subject:</FONT></TD>
<TD><FONT face=verdana,arial,helvetica,san-serif size=1>RULE
127</FONT></TD></TR></TBODY></TABLE><BR>
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<TD width=400><FONT face=verdana,arial,helvetica,san-serif size=1><FONT
face=Verdana>Rule 127 requires a member seeking to cross block orders
outside the prevailing quotation to inform the specialist of his or her
intention to execute the transaction at a pre-determined, specific price
(the "clean-up" price). The member must determine the extent of the
interest the specialist has in participating in the transaction. There
should not be any intervening trades by the member between the time he or
she informs the specialist and the trade or trades to clean up the block.
A member may, however, trade with the current bid or offer if the clean-up
price for the block is no greater than one-sixteenth of a point away from
the current quotation and both sides of the cross are agency orders. The
specialist should not change the quotation prior to a Rule 127 trade in
order to have the clean-up price of the cross occur at or within the
quotation. If the member is doing a Rule 127 trade at a discount
(premium), he or she should cross the block by bidding (offering) at the
clean-up price and offering (bidding) one-sixteenth of a point higher
(lower).</FONT>
<P><BR><FONT face=Verdana>If the member announces his or her intention to
do a Rule 127 trade, the member should not "walk the book" by trading with
buy (sell) orders on the book at their limit prices above (below) the
clean-up price of the block cross. If the member effects a block cross
below the bid or above the offer in this manner, the member would be in
violation of Rule 127. Additionally, if a specialist is aware of a Floor
broker's intention to do a Rule 127 trade and the broker "walk's the book"
prior to the Rule 127 trade, the specialist would be in violation of Rule
104.10 with regard to his or her agency responsibility to effectively
execute agency orders entrusted to him or her if the specialist allows the
broker to trade with public orders on the book at prices inferior to the
clean-up price (or the break-up price if the broker crosses the block as a
result of an excessive amount lost at the clean-up
price).</FONT><BR><BR><FONT face=Verdana>If the member does not announce
his or her intention to do a Rule 127 trade, the specialist should require
the broker to give the clean-up price to public orders that were on the
book if the broker "walk's the book" and subsequently executes a block
cross which the specialist believes should have been announced and
executed under Rule 127 prior to the member's trading with orders on the
book. </FONT><BR><BR><FONT face=Verdana>Questions regarding this matter
may be directed to David Fisch at 656-6769 or John Gregoretti at 656-6791.
</FONT><BR><BR><FONT face=Verdana>Agnes M. Gautier</FONT><BR><FONT
face=Verdana>Vice President</FONT></P></FONT></TD></TR></TBODY></TABLE></DIV>
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