Fast moving markets are markets that experience heavy trading volumes and wide price fluctuations within a short period of time. The following information is provided as a discussion of Customer concerns about trading in fast markets, and what we at StockCross/NetVest do to support our customers during periods of market volatility.

Although many investors have come to expect quick executions at or near the quotes displayed on their computer screens, there are certain factors beyond our control. Compared to markets before customers were able to electronically place their own trades, there has been a marked increase in the price volatility of many stocks. This volatility has been coupled with unprecedented trading volume in the affected stocks. Customers eager to trade affected stocks have flooded their brokers with large numbers of orders, leading to large order imbalances on a particular "side" of the market (i.e. buy vs. sell), systems queues, and backlogs. The result is that some investors wishing to place trades or even simply get timely real-time quotes on these issues, have experienced substantial differences between the price at which they expected to buy or sell a security, and the price they actually received in the marketplace.

Remember that the market is driven by supply and demand, and many affected stocks have limited supply coupled with extraordinary demand. This combination can drive prices up or down dramatically and very rapidly. In such fast markets, customers placing "market" orders could end up buying or selling the affected security at a price that is significantly different from the price displayed only moments earlier, and thus the price they are expecting. Market orders are executed on a first come, first served basis. In the time between when your order is submitted in the marketplace and the time it executes, other orders already in line ahead of yours may affect the stock price. Remember, fast market order backlogs have exceeded 30 minutes in certain instances.

If you decide to place an order in a fast market, entering a "limit" order instead of a market order allows you to stipulate a maximum price that you are willing to pay when buying, or a minimum that you are willing to receive when selling.

During these extreme market conditions, many firms implemented procedures that are designed to preserve the continuous execution of customers’ orders while also lessening the exposure of the firm to extraordinary market risk. For example, some Market Maker firms temporarily discontinued normal automatic order executions and handled orders manually. Firms also reduced their size guarantees on individual stocks or groups of stocks (i.e., stocks of Internet issuers) on a going forward basis. Delays in order executions and executions at prices significantly away from the market price quoted at the time the order was entered then occurred, which in turn led to market losses caused by executions at prices higher or lower than customers expected, especially with respect to orders placed over the Internet. Since StockCross/NetVest does not make a market in any securities, any such procedures implemented by market makers affects orders transmitted to the market maker by StockCross via our clearing firm.

Fast market conditions may also result in delays in trade executions and/or trade reports. To avoid creating duplicate orders, you should consider these delays and the chance that your order has executed but not yet been reported, before placing a change order or a cancellation order. Change or cancel orders do not expedite trade reports when a stock is trading in fast market conditions. In fact, they may have the opposite effect by subjecting the brokers and market makers with more information to process. Also, a market order cannot be changed or canceled once a stock begins trading, whether or not a fast market condition exists.

Market openings can be particularly volatile. Due to the process involved in setting an opening price for a security based upon the orders accumulated since the previous close of trading in the security, large imbalances in supply and demand create circumstances that can and do result in execution prices that differ significantly from quotes and delays in trade executions and reports. Additional trade orders being placed in the fast market add to the problem.

In order to ensure that we have adequate systems capacity to handle high volume or high volatility trading days, we have recently more than doubled our website capacity. We will continue to add capacity going forward. We are expanding capacity in our PhoneBroker touch-tone system also. We are currently working on plans to notify customers when they are requesting a quote or placing an order on a stock deemed to be in fast market conditions. In the meantime, we may limit access to certain securities via the website and PhoneBroker. During such times, we ask customers to place orders for affected securities with representatives via the phone at (800) 961-1500. Remember that fast market conditions apply only to individual securities or related groups of securities, and most other securities remain unaffected and subject to normal trading conditions and availability.

StockCross/NetVest is committed to providing our customers with new technology allowing better and faster access to their accounts and markets. Along with the benefits of such advances, however, comes new challenges to be considered and dealt with to make the potential a reality. We will continue to focus our efforts on improving our service to our customers so they may make investing decisions with confidence.