Q
OFFICE OP COMPLIANCE AND INBPIICTIONdl
UNITED
STATES
SECURITIES
AND
EXCHANGE
D.C.20519
COMMISSION
WASHINGTON,
December 20, 2000
Via Facsimile and Mail
Ms. Shana Bernard 885 Third Madoff Skoller Securities
Director of Compliance
L. MadoffInvestment Avenue
New York, NY
Dear Ms. Skoller:
10022
On October 29, 1999, the Staff requested information from Bernard L. Madoff
Investment Securities ("MADF") regarding compliance SECRule11Acl-4 its with (the "Display Rule").As part of thisrequest, staffaskedMADF provide printout all the to a of customer limitorders received heldby the firmon October or 11-12,1999in tenactively traded
listed securities.' In a follow-uprequest,the Staffrequestedinformation regarding customer limit orders receivedor held by MADEon October25, 1999in ten over-the-counter securities.2
The staff randomly selected 643 eligible customer limit orders to determine whether
MADFhandledthe orders in compliancewith the DisplayRule. The Staff foundthat 119 of the
orders, or approximately 18%, failed to be displayed for a duration of30 seconds or longer when
theorderswererequired be displayed the Display to by Rule. In someinstances, MADE failed to display fullsizeof eligible the customer limitorders, in other, and instances, MADE failedto
display both the price and size of eligible customer limit orders.
The violationsdescribedaboveare broughtto your attentionfor immediatecorrective
action,without regard anyotheractionthe Commission takeor i·equire be takenas a to may to
result thisexamination. of Notwithstanding any'actions bytheCommission regard taken with to
("AOL"), PfizerInc.C'PFE"), Honeywell, C'HON"), Inc. Micron Technology C'MU"), Inc. Wachovia
and Time Warner Inc. ("TWX").
The requested Staff customer orders thefollowing listed limit in ten securities: America Corp. Online
Corp. ("WB"), Corp. CSX ("CSX"), Logic ("LSI"), Corp. AT&T ("T"), Corp. LSI Corp. Exxon C'XON"), 2 The requested Staff customer orders thefollowin~over-the-counter Cisco limit in ten securities: Systems
Inc.("CSCO"),' CIENA Corporation ("CIEN"), Qualcomm, ("QCOM"), Communications, Inc. Nextel Inc.
("NXTL"), Adaptec, ~ADPT'),Biomet, ("BMET'), Inc. Inc. ;Qmgen ("AMGN"), Inc. C-Cube Microsystems C'CUBE"), Inc. Glenayre Technologies, ("GEMS"), Q.west Inc. and Communications
International Inc. ("QWST').
MADOFF
EXHIBITS-06062
Ms. Shana Skoller
December20,2000
Page 2
theabove violations, promptly please advise Staff writing tothespecific the in as procedures
please respond specificalllthefollowing to questions:
whichMADFhas, or will,put effect prevent into to fUrther violations law.Inaddition, ofthe
i. 2.
3.
DescribeMADF's proceduresinternal handling how current and/or order system
of customer limit orders.
ensurecompliancewith the DisplayRule withrespect the display thepropersize to of
DescribeMADF's proceduresinternal handling how current and/or order system
when lotorders stop orders thebest odd or limit are priced orders itsbook? on
Please provide listofthescenarios would a that cause momentary a quote-through
of
ensure MADF that displays proper and ofeligible the price size customer orders limit
aneligible customer order. limit Describe MADF's procedures how current and/or
through.
Pleasestate the currentaveragetime it takesMADFto correct a momentary quote-
to the display of eligible customer limit orders a momentary after quote-through.
internalorder handlingsystemensurecompliance theDisplay with Rulewithrespect
4.
relating compliance theDisplay since to with Rule No~iember and reasons 1999 the
for the changes.
Describechanges any toMADF's procedures internal handling and/or order system
days the of of date
Personal Privacy
The requests you Staff that submit written your re
Personal Privacy
contact ~you any please meat If havequestions,
00Tina or Barry a
Sincerely,
\C~l~g
Director
MADOFF
EXHIBITS-06063