Nasdaq Announces New Electronic Trading Platform

by Carla Johnson, Investors Offshore, London

11 July 2002

At a press conference in New York yesterday Nasdaq said it would launch its new SuperMontage electronic order display and execution system on July 29. The system, which has cost $170m to develop is a real-time, fully integrated order display and execution system, and will be rolled out in stages, beginning with the most-traded stocks.

"This should reduce intraday volatility through more information, liquidity and depth," said Nasdaq President Richard Ketchum. SuperMontage will aggregate the top five proposed purchase and selling prices for a stock, giving traders more access to possible trades and increasing transparency; the system also offers anonymity to buyers and sellers during the pretrade process.

Ketchum believes the expectation of increased competition from SuperMontage contributed to recent consolidation among electronic communications networks, including the Instinet's buyout of Island ECN last month. The $508m, all-stock purchase of New York-based Island has created an electronic communications network that represents about 22% of Nasdaq's order flow. Island and Instinet are in the process of merging their technical and trading systems and intend to emerge as an exchange in their own right, with their own liquidity.

Although the US stock-trading market is itself an island at present, in terms of global equity trading, the long-term prize is to be able to offer Internet-based trading in world-wide stocks, and Nasdaq, which has been both slow and late in its technological development, no doubt hopes that SuperMontage will lay the foundations for its future competitive position.

But Instinet already offers its customers access to a varied selection of markets (pools of liquidity, in effect) throughout the world using its GlobalTransport technology, and has announced a new technology called Newport, which it says: 'allows our customer to trade with a global trading strategy across indexes, portfolios on 40 markets around the world. Newport has been used by our trading desk with about 10 customers, and we expect to roll it out to many more throughout the next year.'

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