Tony,,.... then ansdaq tries to implement a "central order book" they will screw it up bigtime again, given their weak systems and their series of failures.......total nonsense. Why can't they get their act together while the tiny isld, ans inca is working brilliantly...
Nasdaq's Central-Market Plan Draws Computer Capacity
ConcernsWashington, Feb. 22 (Bloomberg) -- The Nasdaq Stock Market's
latest proposal to centralize trading of customer orders is
drawing concern about whether Nasdaq's computers can handle an
expected surge in quote and message traffic.
''This would be a technological nightmare,'' said Harold
Bradley, a senior vice president for American Century Investment
Management, the fifth-largest no-load mutual fund company.
Nasdaq's systems already have been beset by delays and outages in
recent months as volume has soared.Mutual fund companies, brokerages and electronic trading
networks like Reuters Group Plc's Instinet Corp. say Nasdaq's
proposal for a central market could overwhelm its trading systems.
The skeptics include some brokers who stand to benefit financially
from the proposal and are among its most vocal supporters.The so-called super-montage proposal, issued for public
comment by the Securities and Exchange Commission last October,
seeks to link scattered markets created by Instinet and the eight
other low-cost trading networks.It would have dealers' trading screens list the three best
buy and sell quotes for any stock, instead of just one, and would
list quotes from Nasdaq dealers and the electronic networks.
Dealers and investors now must search for the best prices among
these networks, which automatically match buyers and sellers using
their individual systems.Nasdaq officials say they have developed a new, proprietary
$10 million system that would vastly increase their computers'
capacity under the plan.Capacity Concerns
''The industry's concerns are reasonable, but we will flat-
out be able to handle the capacity issues,'' said Rick Ketchum,
president of the National Association of Securities Dealers, which
owns Nasdaq. The new system, which adapts Nasdaq's current Unisys
Corp. and Compaq Computer Corp. technology, has passed preliminary
tests, he said.Ketchum said he expects the SEC, which has been briefed on
Nasdaq's new technology, to approve the proposal by September.
The second largest U.S. stock market expects to then phase it in
starting around December, he said.SEC officials declined to say whether they would approve the
proposal.
''There are some very positive things in the proposal,'' SEC
market-regulation director Annette Nazareth said. ''We've been
assured there will be no capacity problems.''The Nasdaq plan advances goals outlined by SEC Chairman
Arthur Levitt last September, when he asked the U.S. stock markets
to consider forming a central national market for so-called
''limit orders'' at specified prices. ''The more customer orders
that interact with one another, the better the prices will be,''
Levitt said in a speech at the Columbia University Law School.The SEC plans to release a preliminary proposal this week
that would seek public comment on issues involved with
centralizing U.S. markets. Levitt expects this proposal, called a
''concept release,'' to generate sharp conflict among market
participants who stand to gain or lose under the plan. Any changes
ultimately produced by this release are likely to be years away,
long after Levitt is expected to retire.Approval ExpectedA former SEC official said that the commission might delay
the Nasdaq proposal because of the industry's technology concerns,
but ultimately would probably approve the plan.
''In the end, Arthur Levitt is committed to centralizing the
market,'' said Erik Sirri, a former SEC chief economist now a
Babson College finance professor.Congress also plans to weigh in on the debate. The House
Commerce subcommittee on finance, chaired by Representative Mike
Oxley, an Ohio Republican, plans to hold hearings next month on
the Nasdaq plan and other market-structure issues, a panel
spokesman said.
Nasdaq's main SelectNet trading platform has been plagued by
breakdowns recently. On Nov. 16, for example, SelectNet failed for
17 minutes at the end of the trading session, and experienced
delays for another half an hour at the start of trading the next
day. Many traders lost money because they couldn't immediately
find out whether their buy and sell orders had been executed.
Best QuotesUnder Nasdaq's plan, displays would show the three best buy
and sell quotes that have been entered as limit orders with a firm
or trading network, along with the total number of shares ordered
at that price. Dealers then could electronically execute the
orders, much as electronic trading networks now do.Market participants' comment letters to the SEC were due by
Jan. 11. The commissioners will consider the comments and decide
whether to approve the Nasdaq proposal.The Nasdaq proposal has split the securities industry along
lines that reflect the participants' financial interests.It's supported by many brokerages, including the largest,
Merrill Lynch & Co., who could more quickly fill high-volume
orders and could continue to internally match orders at the best
available prices. It's opposed by electronic trading networks
whose business might be undercut by their larger stock-market
rival. Mutual fund companies, which would prefer a central market
without dealer intermediaries, call the plan a small but
inadequate first step.Members of all these groups express concerns about its effect
on Nasdaq's technology.
''We want concrete proof before it's approved that the
technology can deliver,'' said Rob King, chairman of the Security
Traders Association, a brokers trade group, and a managing
director at Citigroup Inc.'s Robinson-Humphrey Co. brokerage in
Atlanta. ''Nasdaq has said a lot of things in the past, and people
remain frustrated with its technology.''Computers TaxedKing and the STA support the plan while voicing doubts about
Nasdaq's technology. Quote and message traffic are expected to
increase as the central market attracts greater volume to Nasdaq.Nasdaq's computers also will be taxed by the introduction of
decimal increments to replace fractions later this year, King
said. Decimals, which are also expected to increase quote traffic,
are due to be phased in on U.S. stock markets between July and
October.Nasdaq officials said they plan to join with security
industry participants to test the new system architecture before
it is put into effect.
''We're going to test the blazes out of this,'' said Gregor
Bailar, Nasdaq's executive vice president for technology.The new architecture would split the quote and message
traffic onto two computer processing ''engines,'' Bailar said.
This technology could quickly expand to at least 20 engines if
volume unexpectedly increases, he said.Nasdaq also will be helped by its consolidation of most
trading onto one system next month, Ketchum said. Much of the
market's volume will be transferred from the troubled SelectNet
platform to the automated Small Order Execution System, which will
continue to be used once the ''super-montage'' is introduced, he
said.During the last decade, Nasdaq has unsuccessfully floated a
succession of plans aimed at centralizing its market and reducing
investors' trading costs. Most recently, its ''Next Nasdaq''
proposal, which would have restricted the role of dealers, was
shot down by brokerage opposition in 1998. |
