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4. Volume Condition
The volume condition limits the amount of securities an issuer may repurchase in the market in a single day. The volume condition is designed to prevent an issuer from dominating the market for its securities through substantial purchasing activity.18 An issuer dominating the market for its securities in this way can mislead investors about the integrity of the securities market as an independent pricing mechanism.19
Under the current volume condition, an issuer may effect daily purchases in an amount up to 25% of the ADTV in its shares (the "25% volume limitation").20 However, the current 25% volume limitation does not include an issuer's block purchases. Moreover, an issuer's block purchases are not included in determining a security's four-week ADTV under the Rule.21 The current Rule defines a "block" as a quantity of stock that either: (i) has a purchase price of $200,000 or more; or (ii) is at least 5,000 shares and has a purchase price of at least $50,000; or (iii) is at least 20 round lots of the security and totals 150 percent or more of the trading volume for that security or, in the event that trading volume data are unavailable, is at least 20 round lots of the security and totals at least one-tenth of one percent (.001) of the outstanding shares of the security, exclusive of any shares owned by any affiliate.22
The definition also provides that a block does not include any amount a broker or dealer, acting for its own account, has accumulated for the purpose of selling to the issuer, if the issuer knows or has reason to know that such amount was accumulated for such purpose. The definition also excludes any amount that a broker or dealer has sold short to the issuer, if the issuer knows or has reason to know that the sale was a short sale.23
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