National Market System (NMS): An Overview of Over-the-Counter Trading Under NASD Sponsorship

2 min read | May 29, 2025 06:19 AM PDT | By Team Kalkine Media

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National Market System (NMS): An Overview of Over-the-Counter Trading Under NASD Sponsorship — Image source: Shutterstock

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Highlights

NMS governs the trading of OTC stocks meeting strict size, profitability, and activity criteria.

It provides more detailed and timely trading information compared to non-NMS OTC stocks.

Market makers in NMS must report transaction prices and volumes within 90 seconds, ensuring near real-time data.

The National Market System (NMS) represents a specialized framework for over-the-counter (OTC) stock trading under the sponsorship of the National Association of Securities Dealers (NASD). This system is designed to regulate and organize the trading of OTC stocks that meet specific benchmarks related to company size, profitability, and trading volume. Only stocks fulfilling these criteria are eligible to be traded within the NMS framework.

One of the key features of the NMS is the enhanced transparency and availability of trading data for these stocks. Unlike non-NMS OTC stocks, which provide limited and delayed trading information, NMS stocks offer comprehensive data such as high, low, and last-sale prices, cumulative volume figures, and continuous bid and ask quotations throughout the trading day. This improved access to information helps investors make more informed decisions and supports a more efficient market environment.

A significant reason behind this detailed data availability is the requirement placed on market makers within the NMS to report the actual price and number of shares involved in every transaction within a strict 90-second window. This near real-time reporting contrasts with non-NMS OTC stocks, where sales prices and volume data are reported less frequently, limiting the ability to track price movements and trading activity on a minute-to-minute basis.

In conclusion, the National Market System enhances the structure and transparency of over-the-counter trading by imposing stringent requirements on eligible stocks and market participants. Its focus on timely and comprehensive reporting fosters greater market efficiency and provides investors with valuable insights that are not typically available in non-NMS OTC trading environments.

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